<PAGE> 1
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 September 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the Transition Period
From to
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Commission file number 1-12056
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THE TOWN AND COUNTRY TRUST
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(Exact name of registrant as specified in its charter)
MARYLAND 52-6613091
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SUITE 1700
100 SOUTH CHARLES STREET
BALTIMORE, MARYLAND 21201
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(Address of principal executive offices) (Zip Code)
(410) 539-7600
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address, or 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 periods that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
----- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
COMMON SHARES OF BENEFICIAL INTEREST, $.01 PAR VALUE - 15,765,848
OUTSTANDING AS OF OCTOBER 31, 1998
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The Town and Country Trust
Form 10-Q
INDEX
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Part I: Financial Information
- -----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets of The Town and Country Trust as of September 30, 1998 and as of December 31,
1997. 1
Consolidated statements of operations of The Town and Country Trust for the three-month and nine-month
periods ended September 30, 1998 and 1997. 2
Consolidated statements of cash flows of The Town and Country Trust for the nine-month periods ended
September 30, 1998 and 1997. 3
Notes to consolidated financial statements. 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 5
Part II: Other Information
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Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits or Reports on Form 8-K 8
Signature 9
</TABLE>
(i)
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Part I: Financial Information
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The Town and Country Trust
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------
SEPTEMBER 30, DECEMBER 31,
1998 1997
-------------------------------
ASSETS (in thousands)
<S> <C> <C>
Real estate assets:
Land $ 80,935 $ 77,566
Buildings and improvements 524,688 492,482
Other 4,584 3,904
--------- ---------
610,207 573,952
Less accumulated depreciation (241,719) (222,946)
--------- ---------
368,488 351,006
Cash and cash equivalents 6,201 4,259
Restricted cash 1,310 1,125
Receivables 1,391 2,030
Prepaid expenses and other assets 6,791 4,240
Deferred financing costs, net of allowance for amortization
(1998-$386, 1997-$114) 3,324 3,591
========= =========
Total assets $ 387,505 $ 366,251
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages payable $ 335,750 $ 300,000
Accrued interest 1,752 1,756
Accounts payable and other liabilities 6,459 4,731
Security deposits 1,938 1,698
Minority interest 5,683 7,948
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Total liabilities 351,582 316,133
Shareholders' equity:
Common shares of beneficial interest ($.01 par value),
500,000,000 shares authorized 158 158
Additional paid-in capital 319,123 319,061
Accumulated deficit (280,985) (266,440)
Unearned compensation - restricted stock (2,373) (2,661)
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35,923 50,118
--------- ---------
Total liabilities and shareholders' equity $ 387,505 $ 366,251
========= =========
</TABLE>
See accompanying notes to financial statements.
1
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The Town and Country Trust
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Rental $ 24,636 $ 22,957 $ 71,646 $ 67,941
Other 577 445 1,441 1,310
-------- -------- -------- --------
25,213 23,402 73,087 69,251
Expenses:
Operating 5,785 5,526 16,503 16,382
Real estate taxes 1,778 1,735 5,344 5,203
Depreciation 6,342 6,047 18,854 18,213
Marketing and advertising 977 935 2,859 2,747
Repairs and maintenance 1,893 1,828 5,341 4,981
General and administrative 833 599 2,416 1,766
-------- -------- -------- --------
17,608 16,670 51,317 49,292
Interest expense 5,632 4,524 16,430 13,380
Interest expense related to the
amortization of deferred
financing costs 91 387 272 1,471
-------- -------- -------- --------
23,331 21,581 68,019 64,143
-------- -------- -------- --------
Income before minority interest
and extraordinary item 1,882 1,821 5,068 5,108
Income allocated to minority
interest 258 248 695 698
-------- -------- -------- --------
Income before extraordinary item 1,624 1,573 4,373 4,410
Extraordinary item - cost related
to refinancing of debt (net
of $397 minority interest) -- (2,512) -- (2,512)
-------- -------- -------- --------
Net income $ 1,624 $ (939) $ 4,373 $ 1,898
======== ======== ======== ========
Weighted average common shares
outstanding - basic 15,524 15,512 15,523 15,512
Dilutive effect of outstanding
options and
restricted shares 121 222 163 198
-------- -------- -------- --------
Weighted average common shares
outstanding - diluted 15,645 15,734 15,686 15,710
======== ======== ======== ========
Per common share - basic and diluted:
Income before extraordinary item $ 0.10 $ 0.10 $ 0.28 $ 0.28
Extraordinary item -- (0.16) -- (0.16)
-------- -------- -------- --------
Net income $ 0.10 $ (0.06) $ 0.28 $ 0.12
======== ======== ======== ========
Dividends declared and paid per
share outstanding $ 0.40 $ 0.40 $ 1.20 $ 1.20
</TABLE>
See accompanying notes to financial statements.
2
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The Town and Country Trust
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
---------------------------------
OPERATING ACTIVITIES (in thousands)
<S> <C> <C>
Income before minority interest and extraordinary item $ 5,068 $ 5,108
Adjustments to reconcile income before minority interest and extraordinary item
to net cash provided by operating activities:
Depreciation 18,854 18,213
Interest expense related to the amortization of deferred financing costs 272 1,471
Amortization of unearned compensation 288 220
Changes in operating assets and liabilities:
Increase in restricted cash (185) (75)
Decrease in funds deposited with mortgagee -- 2,441
Increase in receivables, prepaid expenses and other assets (1,912) (2,434)
Increase (decrease) in accounts payable, other liabilities, accrued
interest and security deposits 1,964 (3,127)
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Net cash provided by operating activities 24,349 21,817
INVESTING ACTIVITIES
Additions of real estate assets, net of disposals (22,394) (3,572)
Additions pursuant to value-added capital improvements program (13,942) (1,625)
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Net cash used in investing activities (36,336) (5,197)
FINANCING ACTIVITIES
Borrowings on mortgages payable 35,750 300,000
Payments on original mortgages -- (232,000)
Payments on notes payable -- (58,409)
Proceeds from exercise of share options 62 2
Costs related to refinancing of debt -- (742)
Increase in deferred financing costs (5) (3,236)
Dividends and distributions (21,878) (21,804)
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Net cash used in financing activities 13,929 (16,189)
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Increase in cash and cash equivalents 1,942 431
Cash and cash equivalents at beginning of period 4,259 1,725
--------- ---------
Cash and cash equivalents at end of period $ 6,201 $ 2,156
========= =========
Cash interest paid $ 17,094 $ 18,195
========= =========
</TABLE>
See accompanying notes to financial statements.
3
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The Town and Country Trust
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of The Town and Country Trust
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments, consisting only of recurring normal accruals,
considered necessary for a fair presentation have been included. Operating
results for the three-month and nine-month periods ended September 30, 1998 are
not necessarily indicative of the results that may be expected for a full fiscal
year. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants, restricted shares and convertible securities.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. Earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements.
3. REAL ESTATE ACQUISITIONS
On March 31, 1998, the Company purchased The Villages of Forest Ridge, a
330-unit garden apartment community located in Charlotte, North Carolina, for
approximately $18,500,000.
On October 14, 1998, the Company purchased The Fairington, a 250-unit garden
apartment community located in Charlotte, North Carolina, for approximately
$18,000,000.
Both purchases were made with funds from the Company's credit facility.
4. SUBSEQUENT EVENT
The Company has arranged a $50 million revolving line of credit with a bank to
be used for acquisitions. Borrowings under this facility will bear interest at
120 basis points over LIBOR.
On November 4, 1998, the Company announced that its Board of Trustees had
declared a dividend for the quarter ended September 30, 1998 of $.40 per share,
aggregating $6,306,339. Concurrent with the
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payment of the dividend, a $986,614 limited partnership distribution will be
made to the minority interest holders. The dividend and distribution will be
paid on December 10, 1998 to holders of record on November 13, 1998.
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
The following discussion is based primarily on the consolidated financial
statements of The Town and Country Trust (the "Company") as of September 30,
1998 and for the three-month and nine-month periods ended September 30, 1998 and
1997. This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
The financial statements include all adjustments which are, in the opinion of
management, necessary to reflect a fair statement of the results for the interim
periods presented, and all such adjustments are of a normal recurring nature.
The Company believes that funds from operations provides an indicator of its
financial performance. Funds from operations is defined as net income (loss)
excluding adjustments for unconsolidated partnerships and joint ventures as well
as gains (losses) from debt restructuring and sales of property, plus
depreciation of revenue-producing real property. This definition of funds from
operations is consistent with the National Association of Real Estate Investment
Trusts (NAREIT) definition. Funds from operations is affected by the financial
performance of the properties and the capital structure of the Company. Funds
from operations does not represent cash flow from operations as defined by
generally accepted accounting principles and is not necessarily indicative of
cash available to fund all cash flow needs. Funds from operations should not be
considered as an alternative to net income as an indicator of operating
performance or as an alternative to cash flow as a measure of liquidity.
Results of Operations - Three Months Ended September 30, 1998 and 1997
- ----------------------------------------------------------------------
Income before minority interest for the three months ended September 30, 1998
was $1,882,000, compared to $1,821,000 before the extraordinary item for the
same period in 1997. Funds from operations increased by 4.5% to $8,174,000 for
the three months ended September 30, 1998 from $7,820,000 for the three months
ended September 30, 1997. Revenues were $25,213,000 for the three months ended
September 30, 1998 compared to $23,402,000 for the same period in 1997, an
increase of $1,811,000 or 7.7%. On a same-property basis, revenues increased by
$1,156,000 or 4.9% due to increases in rental rates and improvements in
occupancy. The balance of the increase in revenues was due to the property
acquisition that occurred on March 31, 1998. Occupancy was 95.2% for the third
quarter of 1998, compared to 93.8% for the third quarter of 1997.
Total expenses excluding depreciation and interest were $11,266,000 for the
three months ended September 30, 1998 compared to $10,623,000 for the same
period in 1997, an increase of $643,000 due in part to the acquisition of the
new property on March 31, 1998. Operating expenses on a same-property basis
increased by only $156,000 or 2.8%. Marketing and advertising, real estate taxes
and repairs and maintenance increased by $150,000 due in part to the acquisition
of the new property. General and administrative expenses increased by $234,000
for the three months ended September 30, 1998 over the same period in 1997 due
in part to costs related to the initiation of the property acquisitions program.
5
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Interest expense increased by $1,108,000 from the expense in the third quarter
of 1997 due to increases in the amount of borrowings and interest rates that
resulted from the new long-term credit facility and the financing of the capital
improvements program and the new acquisition.
Results of Operations - Nine Months Ended September 30, 1998 and 1997
- ---------------------------------------------------------------------
Income before minority interest for the nine months ended September 30, 1998 was
$5,068,000, compared to $5,108,000 before the extraordinary item for the same
period in 1997. Funds from operations increased by 2.6% to $23,766,000 for the
nine months ended September 30, 1997 from $23,171,000 for the nine months ended
September 30, 1997. Revenues were $73,087,000 for the nine months ended
September 30, 1998 compared to $69,251,000 for the same period in 1997, an
increase of $3,836,000, or 5.5%. On a same-property basis, revenues increased by
$2,547,000 or 3.7% for the first nine months of 1998 over the same period last
year due to increases in rental rates and improvements in occupancy. The balance
of the increase in revenues is due to the property acquisition that occurred on
March 31, 1998. Occupancy was 94.0% for the nine months ended September 30,
1998, compared to 93.1% for the nine months ended September 30, 1997.
Total expenses excluding depreciation and interest were $32,463,000 for the nine
months ended September 30, 1998 compared to $31,079,000 for the same period in
1997, an increase of $1,384,000. Operating expenses increased by only $121,000
or 0.7% for the nine-month period despite the acquisition of a new property.
Real estate taxes, marketing and advertising and repairs and maintenance
increased by $613,000 due in part to the acquisition of the new property.
General and administrative expenses increased by $650,000 due in part to the
start up of the property acquisition program. Depreciation for the nine months
ended September 30, 1998 increased by $641,000 over the nine months ended
September 30, 1997 due in part to the acquisition of the new property.
Interest expense for the nine months ended September 30, 1998 increased by
$3,050,000 from the expense in the same period of 1997 due to increases in the
amount of borrowings and interest rates that resulted from the new long-term
credit facility and additional borrowings in order to finance the capital
improvements program and to purchase the new acquisition.
Liquidity and Capital Resources
- -------------------------------
Operating activities provided unrestricted cash for the nine months ended
September 30, 1998 of $24,349,000 of which $21,878,000 was paid out in dividends
and distributions.
In September, 1997 the Company entered into an agreement that provides a
$375,000,000 secured credit facility. The initial borrowing under the facility
of $300,000,000 matures in 2008 and bears a fixed interest rate of 6.91%. The
majority of the proceeds of the initial borrowing was used to refinance the
Company's publicly-issued and bank mortgage indebtedness which had scheduled
maturities of August, 1998.
The remaining $75,000,000 is available as a 10-1/2 year, variable rate revolving
credit facility which can be converted at the Company's option to a fixed rate
term loan maturing in 2008. The Company intends to use these funds for property
acquisitions and to expand the recently instituted extensive capital improvement
program for certain of the Company's existing properties, as described below.
The Company used a portion of these funds to purchase a 330-unit garden
apartment community on March 31, 1998 and a 250-unit garden apartment community
on October 14, 1998.
6
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The Company has commenced a two-year program that provides for approximately
$25,000,000 in capital improvements to certain properties. The improvements
include paving, roofs, vinyl siding and the expansion of the on-going program to
make such revenue-enhancing improvements as the modernization of kitchens and
bathrooms and the installation of washers, dryers and carpeting within certain
apartment units. $17,481,000 in costs have been incurred related to this program
through September 30, 1998.
The Company has arranged a $50 million revolving line of credit with a bank to
be used for acquisitions. Borrowings under this facility will bear interest at
120 basis points over LIBOR. On September 30, 1998, no funds had been drawn
under this arrangement.
Rental income from the properties is received on a monthly basis. All cash
accumulated for the payment of the quarterly dividends is invested in short-term
instruments. Management believes that the Company will have access to the
capital resources necessary to expand and develop its business. The Company
expects that adequate cash will be available to fund its operating and
administrative expenses, capital expenditures, debt service obligations and
payments of dividends in the foreseeable future.
Safe Harbor Statement
- ---------------------
With the exception of historical information, the matters discussed in this
Report are forward-looking statements that involve risks and uncertainties and
actual results could differ materially from those discussed. Certain statements
herein and in future filings by the Company with the Securities and Exchange
Commission and in written and oral statements made by or with the approval of
any authorized executive officer of the Company constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The Company intends that
such forward-looking statements be subject to the safe harbors created by such
Acts. The words and phrases "looking ahead," "we are confident," "should be,"
"will be," "predicted," "believe," "expect," "anticipate," and similar
expressions identify forward-looking statements. These forward-looking
statements reflect the Company's current views in respect of future events and
financial performance, but are subject to many uncertainties and factors
relating to the Company's operations and business environment which may cause
the actual results of the Company to differ materially from any future results
expressed or implied by such forward-looking statements. Examples of such
uncertainties include, but are not limited to, competition for tenants and
acquisitions from others, many of whom may have greater financial resources than
the Company; changes in rental rates which may be charged by the Company in
response to market rental rate changes or otherwise; changes in federal income
tax laws and regulations; any changes in the Company's capacity to acquire
additional apartment properties and any changes in the Company's financial
condition or operating results due to an acquisition of additional apartment
properties; unanticipated increases in operating expenses due to factors such as
casualties to the Company's apartment properties or adverse weather conditions
in the geographic locations of the Company's apartment properties; interest rate
fluctuations; and local economic and business conditions, including, without
limitation, conditions which may affect public securities markets generally, the
real estate investment trust industry, or the markets in which the Company's
apartment properties are located. The Company undertakes no obligation to update
publicly or revise any forward-looking statements whether as a result of new
information, future events or otherwise.
7
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Part II: Other Information
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Items 1 through 5 are not applicable or the answer to such items is
negative; therefore, the items have been omitted and no reference is required in
this report.
Item 6. - Exhibits and Reports on Form 8-K
- --------------------------------------------
(a) 10.1 Financing Agreement dated September 25, 1998 by and among
the Registrant, the TC Operating Limited Partnership, The TC
Property Company II, and The First National Bank of
Maryland.
27 Financial Data Schedule(1)
(b) No reports on Form 8-K have been filed in the quarter for which this
Report is filed.
- ----------------------
1 Filed only in electronic format pursuant to Item 601(b) (27) of Regulation S-K
8
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SIGNATURE
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.
THE TOWN AND COUNTRY TRUST
Date: November 12, 1998 /s/ Jennifer C. Munch
----------------- ------------------------------
Jennifer C. Munch
Vice President - Treasurer
(Principal Accounting Officer)
9
<PAGE> 1
EXHIBIT 10.1
FINANCING AGREEMENT
-------------------
THIS FINANCING AGREEMENT (this "Agreement") is made this 25th day of
September, 1998, by and between THE TOWN AND COUNTRY TRUST, a real estate
investment trust organized and existing under the laws of the State of Maryland
(the "Trust"), THE TC OPERATING LIMITED PARTNERSHIP, a limited partnership
organized and existing under the laws of the State of Maryland (the "Operating
Partnership"), and THE TC PROPERTY COMPANY II, a general partnership organized
and existing under the laws of the State of Maryland (the "Property Company";
the Trust, the Operating Partnership and the Property Company being hereinafter
sometimes referred to individually as a "Borrower" and collectively as the
"Borrowers"); and THE FIRST NATIONAL BANK OF MARYLAND, a national banking
association, (the "Lender").
RECITALS
--------
A. The Borrowers have applied to the Lender for a revolving line of
credit facility in the maximum principal amount of $50,000,000 (the "Credit
Facility") to be used by the Borrowers for the Permitted Uses described in this
Agreement.
B. The Lender is willing to make the Credit Facility available to the
Borrowers upon the terms and subject to the conditions set forth in this
Agreement.
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
terms defined in the Preamble and Recitals hereto shall have the respective
meanings specified therein, and the following terms shall have the following
meanings:
"Advance" means any advance by the Lender of any portion of the
proceeds of the Credit Facility, whether pursuant to the terms of this
Agreement or otherwise.
"Affiliate" means, as to any Person, any Subsidiary of such
Person, or any Person which, directly or indirectly, controls, is controlled
by, or is under common control with such Person and, with respect to each of
the Borrowers, includes the other Borrower, each of the Property Owners, and
each holder of five percent (5%) or more of the equity or partnership interests
of any of the Borrowers, as applicable, and also specifically includes, without
limitation, each of the Persons named in Exhibit A attached hereto and made a
part hereof. For the purposes of this definition, "control" means the
possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities or
<PAGE> 2
partnership interests, by contract or otherwise. For purposes of this
definition, the term "Affiliate" shall not include Alfred Lerner or Harvey
Schulweis or any other Person who or which (a) operates separately from the
Borrowers and/or the Property Owners, (b) is or was not involved in any way
with the FNMA Debt, the initial public offering of the common shares of the
Trust or any subsequent offering, and (c) has no direct or indirect interest in
any of the Apartment Properties or in any of the FNMA Debt Properties.
"Agreement" means this Financing Agreement and all amendments,
modifications and supplements hereto which may from time to time become
effective in accordance with the provisions hereof.
"Apartment Property" means individually and "Apartment
Properties" means collectively, at any time, each and every one of the
multi-family properties located in the continental United States now or
hereafter owned by a Borrower or any Property Owner, the acquisition of which
is financed and/or refinanced with the proceeds of the Credit Facility or which
is otherwise covered by the lien of a Deed of Trust, and which has not been
released from the lien of a Deed of Trust.
"Assets" means at any date all assets that, in accordance with
GAAP consistently applied, should be classified as assets on a consolidated
balance sheet of the Borrowers and their Subsidiaries and Affiliates.
"Assignment of Leases" means, with respect to any portion of the
Property, an Assignment of Lessor's Interest in Leases granted by one of the
Property Owners in favor of the Lender, as security of the payment and
performance of all of the Obligations, and assigning to the Lender, a security
interest in all rents, issues and profits and leases in connection with such
portion of the Property, whether incorporated into the terms of a Deed of Trust
or evidenced by a separate agreement, substantially in the form of Exhibit C
attached hereto and made a part hereof (revised to incorporate any local law
requirements or customary local practices and procedures), and all renewals,
extensions, modifications, supplements and replacements thereof.
"Authorized Representative" means, (a) as to the Trust, its
Chairman, its President, its Executive Vice President(s), its Vice
President-Treasurer or Vice President-Finance, or any other Person duly
authorized by the trustees, by the Trust Declaration or by the bylaws of the
Trust to execute the Financing Documents or any other documents or certificates
to be executed by the Trust hereunder or in connection with the Credit
Facility, (b) as to the Operating Partnership, the Trust in its capacity as
managing general partner of the Operating Partnership, or any other Person duly
authorized by the Trust in such capacity or by the partnership agreement of the
Operating Partnership to execute the Financing Documents or any other documents
or certificates to be executed by the Operating Partnership hereunder or in
connection with the Credit Facility, (c) as to the Property Company, the Trust
in its capacity as managing general partner of the Operating Partnership, in
its capacity as managing general partner of the Property Company, or any other
Person duly authorized by the Trust in such capacity or by the partnership
agreement of the Property Company to execute the Financing Documents or any
other documents or certificates to be executed by the Property Company
hereunder or in connection with the Credit
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Facility, and (d) as to each of the Property Owners, any person or entity
expressly authorized to execute documents on behalf of such Property Owner
pursuant to the terms of the organizational documents of the Property Owner in
question or pursuant to the terms of any other appropriate certificate, consent
or resolution duly adopted by such Property Owner in connection with the Credit
Facility.
"Bankruptcy Code" means the United States Bankruptcy Code, as
amended from time to time.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State are authorized or required to
close.
"Capital Lease" means any lease of real or personal property, for
which the related Lease Obligations have been or should be, in accordance with
GAAP consistently applied, capitalized on the balance sheet.
"Cash Collateral" means all accounts, rents, royalties, issues,
proceeds and profits arising out of or derived from all or any portion of the
Property and all Proceeds derived therefrom.
"Closing Date" means the date of the execution of this Agreement.
"Collateral" means all real and personal property of any kind or
nature whatsoever now or hereafter constituting collateral for the payment and
performance of the Obligations, including without limitation, the Property and
the Cash Collateral, together with any and all cash and non-cash Proceeds and
products thereof.
"Commitment Fee" shall have the meaning ascribed to such term in
Section 2.3.3 hereof.
"Commitment Letter" means the Commitment Letter dated June 11,
1998 issued by the Lender in favor of the Borrowers in connection with the
Credit Facility, including without limitation, all modifications thereof,
amendments thereto and substitutions therefor.
"Debt Service" means the aggregate amount of all payments of
principal and interest in respect of Indebtedness for Borrowed Money of the
Borrowers and their Subsidiaries and/or Affiliates scheduled to be due and
payable during the period in question.
"Deed of Trust" means, with respect to any portion of the
Property, a deed of trust or mortgage or indemnity deed of trust or indemnity
mortgage, substantially in the form of Exhibit D attached hereto and made a
part hereof (revised to incorporate any local law requirements or customary
local practices and procedures), executed by the applicable Property Owner in
favor of the Lender, as security for the payment and performance of the
Obligations, and all renewals, extensions, modifications, amendments or
supplements thereto, and all
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<PAGE> 4
mortgages or deeds of trust or indemnity deeds of trust or indemnity mortgages
given in renewal, extension, modification, restatement or replacement thereof.
"Default" means an event which, with the giving of notice or
lapse of time, or both, could or would constitute an Event of Default under the
provisions of this Agreement.
"Distributions" means for any Person, (a) with respect to any
stock issued by such Person or any partnership, joint venture or membership
interest of such Person, all sums paid by such Person upon the retirement,
redemption, repurchase, or other acquisition for value of such stock,
partnership, joint venture or membership interest, (b) the declaration or
payment of any dividend or other distribution, either monetary or in kind, on
or with respect to any stock, partnership, joint venture or membership interest
of any Person, but excluding any stock dividend, stock split or other
distribution of shares of the Trust, and (c) any other payment or distribution
of assets of a similar nature or in respect of any equity investment and
expressly including any payment or distribution of sales proceeds derived from
the sale of any property in which such entity has a direct ownership interest.
"Dollars" and the "$" symbol shall refer to currency of the
Unites States of America.
"Enforcement Costs" means all reasonable expenses, charges, costs
and fees whatsoever (including, without limitation, reasonable attorney's fees
and expenses) of any nature whatsoever paid or incurred by or on behalf of the
Lender in connection with (a) any or all of the Obligations, this Agreement
and/or any of the other Financing Documents, including without limitation, any
costs associated with the termination or unwinding of any interest rate option
elected by the Borrowers under the Note, and (b) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Collateral, this
Agreement or any of the other Financing Documents, including, without
limitation, those costs and expenses more specifically enumerated in Section
3.6 and/or Section 8.8.
"Environmental Indemnification" means an environmental
indemnification agreement, substantially in the form of Exhibit E attached
hereto and made a part hereof, executed by the Borrowers and/or any one or more
of the Property Owners in favor of the Lender, as security for the payment and
performance of the Obligations, and all renewals, extensions, modifications,
amendments or supplements thereto.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all regulations issued
pursuant thereto.
"Event of Default" has the meaning described in Article VII.
"Expenses" means all reasonable costs and expenses incurred by
the Borrowers and the Subsidiaries and Affiliates of each of the Borrowers for
the period in question, including without limitation, all costs and expenses
incurred in connection with the Apartment Properties,
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including again without limitation, intercompany management fees and expenses
arising out of or in connection with the Apartment Properties; but excluding,
however, depreciation, depletion or amortization of assets, other non-cash
charges incurred in connection with the Apartment Properties, interest expense
and income taxes or other impositions in the nature of income taxes for the
period in question.
"Fees" means the collective reference to each fee payable to the
Lender under the terms of this Agreement, the Note or under the terms of any of
the other Financing Documents, including, without limitation, the Commitment
Fee and any prepayment fee due in accordance with the terms of the Note.
"Financing Documents" means at any time collectively this
Agreement, the Commitment Letter, the Note, the Deeds of Trust, the Assignment
of Leases, the Guaranties, the Environmental Indemnifications and any other
instrument, agreement or document previously, simultaneously or hereafter
executed and delivered by the Borrowers, or any of them, any of the Property
Owners and/or any other Person, singly or jointly with another Person or
Persons, evidencing, securing, guarantying or in connection with this
Agreement, the Note and/or any of the Obligations.
"Fixed or Capital Assets" of a Person at any date means all
assets which would, in accordance with GAAP consistently applied, be classified
on the balance sheet of such Person as property, plant or equipment at such
date.
"FMMC" means First Maryland Mortgage Corporation, its successors
and assigns.
"FNMA Debt" means the indebtedness in the aggregate principal
amount of $375,000,000 (subject to increase to $450,000,000) established
pursuant to the terms of the FNMA Master Credit Agreement.
"FNMA Debt Documents" means all documents, instruments and
agreements evidencing, governing, securing or otherwise pertaining to the FNMA
Debt, including without limitation, the FNMA Master Credit Agreement.
"FNMA Debt Properties" means the various properties which have
been pledged to secure the FNMA Debt, or which secure notes (or guaranties of
such notes) that have been pledged to secure the FNMA Debt, as more
particularly described in Exhibit B attached hereto and made a part hereof.
"FNMA Master Credit Agreement" means the Master Credit Facility
Agreement dated as of September 26, 1997 executed by and between, among others,
the Trust, the Operating Partnership, the Subsidiaries listed on Exhibit A
attached hereto and made a part hereof which own the FNMA Debt Properties, The
Town and Country Holding Corporation, The TC Property Company, The Town and
Country Oriole Corporation and Washington Mortgage Financial Group, Ltd.
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"GAAP" means generally accepted accounting principles
consistently applied as in effect at the time of application of the provisions
hereof; provided, however, that wherever in this Agreement principles of
consolidation different from those required by generally accepted accounting
principles are specified, the principles of consolidation specified in this
Agreement shall govern.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any department, agency or instrumentality thereof.
"Guaranty" means a guaranty agreement, substantially in the form
of Exhibit F attached hereto and made a part hereof, executed by any one or
more of the Property Owners in favor of the Lender, as security for the payment
and performance of the Obligations, and all renewals, extensions,
modifications, amendments or supplements thereto.
"Hazardous Materials" means (a) any "hazardous waste" as defined
by the Resource Conservation and Recovery Act of 1976, as amended from time to
time, and regulations promulgated thereunder; (b) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended from time to time, and regulations promulgated
thereunder; (c) any substance the presence of which on any property now or
hereafter owned or acquired by any of the Borrowers or any of the Subsidiaries
or Affiliates of any of the Borrowers is prohibited by any Law similar to those
set forth in this definition; and (d) any other substance which by Law requires
special handling in its collection, storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination
(whether presently existing or occurring after the date of this Agreement) by
Hazardous Materials of any property owned, operated or controlled by any of the
Borrowers or any of the Subsidiaries or Affiliates of any of the Borrowers or
for which any of the Borrowers or any of the Subsidiaries or Affiliates of any
of the Borrowers has responsibility, including, without limitation,
improvements, facilities, soil, ground water, air or other elements on, or of,
any property now or hereafter owned or acquired by any of the Borrowers or any
of the Subsidiaries or Affiliates of any of the Borrowers, and any other
contamination by Hazardous Materials for which any of the Borrowers or any of
the Subsidiaries or Affiliates of any of the Borrowers is, or is claimed to be,
responsible.
"Impositions" means, with respect to any portion of the Property,
all real estate and personal property taxes, charges for any easement, license
or agreement maintained for the benefit of the Property or any part thereof,
and all other taxes, charges and assessments and any interest, costs or
penalties with respect thereto, general and special, ordinary and
extraordinary, foreseen and unforeseen, of any kind and nature whatsoever,
which at any time prior to or after the execution hereof may be assessed,
levied or imposed upon the Property or any part thereof, or the ownership, use,
sale, occupancy or enjoyment thereof, in each case which, if not timely paid or
otherwise discharged, would materially and adversely affect (a) such ownership,
use, sale,
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occupancy or enjoyment, (b) any of the Lender's Liens with respect to the
Property or (c) the financial condition of any of the Borrowers or any
Subsidiary or Affiliate of any of the Borrowers.
"Improvements" means all of the improvements, including site
improvements, now existing or hereafter constructed or placed on, or comprising
any portion of, the Property.
"Indebtedness" of a Person means at any date the total
liabilities of such Person at such time determined in accordance with GAAP
consistently applied.
"Indebtedness for Borrowed Money" of a Person means at any time
the sum at such time of (a) indebtedness of such Person for borrowed money or
for the deferred purchase price of property or services, (b) any obligations of
such Person in respect of letters of credit, banker's or other acceptances or
similar obligations issued or created for the account of such Person, (c) Lease
Obligations of such Person, excluding, however, any obligations arising under
or with respect to any existing ground lease covering any one or more of the
Apartment Properties and any existing lease for office space or leases of
office equipment or motor vehicles incurred in the ordinary course of business,
(d) all liabilities secured by any Lien on any property owned by such Person,
to the extent attached to such Person's interest in such property, even though
such Person has not assumed or become personally liable for the payment
thereof, (e) obligations of third parties which are being guarantied or
indemnified against by such Person or which are secured by the property of such
Person; (f) any obligation of such Person under an employee stock ownership
plan or other similar employee benefit plan; (g) any obligation of such Person
to a Multiemployer Plan under ERISA; and (h) any obligation of such Person
arising under or relating to any interest rate protection device, including any
interest rate swap arrangement; including without limitation, the Credit
Facility and the FNMA Debt; but excluding, however, trade and other accounts
payable in the ordinary course of business in accordance with customary trade
terms and which are not overdue (as determined in accordance with customary
trade practices) or which are being disputed in good faith and for which
adequate reserves are being provided in accordance with GAAP, and drafts or
other items of payment endorsed by such Person solely for collection.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time, and the Income Tax Regulations issued and
proposed to be issued thereunder.
"Laws" means all ordinances, statutes, rules, regulations,
orders, injunctions, writs, or decrees of any Governmental Authority or
political subdivision or agency thereof, or any court or similar entity
established by any thereof.
"Lease Obligations" of a Person means for any period the rental
commitments of such Person for such period under leases for real and/or
personal property (net of rent from subleases thereof, but including taxes,
insurance, maintenance and similar expenses which the lessee is obligated to
pay under the terms of said leases, except to the extent that such taxes,
insurance, maintenance and similar expenses are payable by sublessees),
including rental commitments under Capital Leases.
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"Lien" means any mortgage, deed of trust, deed to secure debt,
grant, pledge, security interest, assignment, encumbrance, judgment, lien,
hypothecation, provision in any instrument or other document for confession of
judgment, cognovit or other similar right or remedy, claim or charge of any
kind, whether perfected or unperfected, avoidable or unavoidable, including,
without limitation, any conditional sale or other title retention agreement,
any lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction,
excluding the precautionary filing of any financing statement by any lessor in
a true lease transaction, by any bailor in a true bailment transaction or by
any consignor in a true consignment transaction under the Uniform Commercial
Code of any jurisdiction or the agreement to give any financing statement by
any lessee in a true lease transaction, by any bailee in a true bailment
transaction or by any consignee in a true consignment transaction.
"Multiemployer Plan" means a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Note" means the Promissory Note dated of even date herewith
executed by the Borrowers, as makers, in favor of the Lender, as payee, in the
principal amount of $50,000,000 to evidence the Credit Facility, together with
all modifications thereof, amendments thereto and substitutions therefor.
"Obligations" means all present and future indebtedness, duties,
obligations, and liabilities, whether now existing or contemplated or hereafter
arising, of the Borrowers, or any of them, or any other Person or Persons to
the Lender under, arising pursuant to, in connection with and/or on account of
the provisions of this Agreement, the Note, the Deeds of Trust, and any of the
other Financing Documents and the Credit Facility, including, without
limitation, the principal of, and interest on, the Note, late charges, the
Fees, all Impositions, all Enforcement Costs, prepayment penalties (if any),
all costs, expenses, and reasonable attorneys' fees of counsel to the Lender
incurred in the documentation of any amendments, waivers or extensions of the
Financing Documents or the administration thereof, and the reimbursement and
payment of all sums which might be advanced by the Lender to pay or satisfy
amounts required to be paid by the Borrowers or any of the Property Owners
under this Agreement or under any other instrument, agreement or document at
any time executed in connection with or as security for any part of the Credit
Facility or any amounts which might be advanced by the Lender to pay any Taxes,
Impositions, insurance premiums, Liens, assignments, charges or claims against
any or all of the Collateral, or any properties covered by any instrument
executed or to be executed by any of the Borrowers, or any of the Property
Owners to secure any part of the Obligations. The Borrowers shall be jointly
and severally liable for the payment and performance of all Obligations herein.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means: (a) Liens for Taxes which are not
delinquent or which the Lender has determined in the exercise of its sole and
absolute discretion (i) are being diligently contested in good faith and by
appropriate proceedings, (ii) the Person or Persons responsible for the payment
thereof have the financial ability to pay, with all penalties and interest, at
all
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times without materially and adversely affecting such Person or Persons, and
(iii) are not, and will not be with appropriate filing, the giving of notice
and/or the passage of time, entitled to priority over any Lien of the Lender;
(b) deposits or pledges to secure obligations under workers' compensation,
social security or similar laws, or under unemployment insurance in the
ordinary course of business; (c) Liens in favor of the Lender; (d) judgment
Liens to the extent the entry of such judgment does not constitute a Default or
an Event of Default under the terms of this Agreement or result in the sale of,
or levy of execution on, any of the Collateral; (e) leases of space in an
Apartment Property in the ordinary course of business of any Borrower or the
Property Owner which is the owner thereof; and (f) as to any Apartment
Property, easements, restrictions and other matters permitted by the express
terms of the Deed of Trust which encumbers such Apartment Property.
"Permitted Uses" means the purposes for which the proceeds of the
Credit Facility are expressly intended to be used as disclosed to the Lender
and as more particularly set forth in Section 2.1.2 hereof.
"Person" means and includes an individual, a corporation, a
partnership, a joint venture, a limited liability company, a trust, an
unincorporated association, a government or political subdivision or agency
thereof or any other organization or entity.
"Plan" means any pension plan which is covered by Title IV of
ERISA and in respect of which the Borrowers or any of the Subsidiaries or
Affiliates of any of the Borrowers is an "employer" as defined in Section 3 of
ERISA.
"Post-Default Rate" means the rate of interest which is at all
times equal to the greater of (a) the Prime Rate plus four percent (4%) per
annum or (b) four percent (4%) per annum in excess of the rate of interest then
accruing under the Note.
"Prime Rate" means the greater of the rate announced by the
Lender from time to time as its "prime rate" or the average rate, rounded to
the nearest one-tenth of one percent (.1%), for 90-day maturity, dealer-placed
commercial paper for the week most recently reported in the Federal Reserve
Statistical Release No. H-15: "Selected Interest Rates" (or any succeeding
publication). The Prime Rate does not necessary represent the lowest rate of
interest charged by the Lender to borrowers.
"Proceeds" means all Proceeds as defined in the Uniform
Commercial Code.
"Property" means collectively each and every one of the Apartment
Properties with respect to which any Advance shall be made under the Note in
accordance with the terms of this Agreement and all other items of real and
personal property now or hereafter covered by the Liens of the Deeds of Trust.
"Property Owners" means each Affiliate and/or Subsidiary now or
hereafter owning any property which is then one of the Apartment Properties.
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<PAGE> 10
"Purchase Price" means, with respect to any Apartment Property,
the actual consideration paid by the Property Owner in question at the time of
the acquisition of such Apartment Property as expressed in the deed pursuant to
which title to such Apartment Property was conveyed, exclusive of adjustments,
settlement expenses, professional fees and other charges incurred in connection
therewith.
"REIT Status" means, with respect to the Trust, its status as a
real estate investment trust as defined in Section 856(a) of the Internal
Revenue Code and as governed by Subsection 856 ET SEQ. of the Internal Revenue
Code, and other provisions of the Internal Revenue Code referred to or
incorporated in, or referring to or incorporating any other provisions of, said
Sections, or similar provisions of successor statutes, and applicable
regulations under and rulings in respect of the aforesaid provisions of the
Internal Revenue Code.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Restricted Accounts" means those depository accounts of any of
the Borrowers and/or any of the Subsidiaries and Affiliates of any of the
Borrowers maintained with the Lender and (a) more particularly described in
Exhibit A attached hereto and made a part hereof, or (b) established after the
date hereof which do not relate in any way to any of the Apartment Properties
or the income derived therefrom and which, at the time of the establishment of
the same, are designated in writing by the Borrowers to the Lender as one of
the Restricted Accounts.
"State" means the State of Maryland.
"Subordinated Indebtedness" means all Indebtedness incurred at
any time by any of the Borrowers, the repayment of which is subordinated to the
Obligations by a written agreement in form and substance satisfactory to the
Lender in its sole and absolute discretion.
"Subsidiary" means any Person the majority of the voting shares
of which, or other interests in which, at the time are owned directly by any of
the Borrowers and/or by one or more Subsidiaries of the Borrowers, including
without limitation, all of those Persons named on Exhibit A attached hereto and
made a part hereof.
"Taxes" means all taxes and assessments whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character (including all penalties or interest thereon), which at any time may
be assessed, levied, confirmed or imposed by any Governmental Authority on any
of the Borrowers or any of the Subsidiaries or Affiliates of any of the
Borrowers or any of its or their properties or assets or in respect of any of
its franchises, businesses, income or profits.
"Trust Declaration" means that certain First Amended and Restated
Declaration of Trust dated June 24, 1993, executed by the trustees of the
Trust, and filed with the Department of Assessments and Taxation of the State
of Maryland.
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"Uniform Commercial Code" means, unless otherwise provided in
this Agreement, the Uniform Commercial Code as adopted by and in effect from
time to time in the State or in any other jurisdiction, as applicable.
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS. Unless
otherwise defined herein, as used in this Agreement and in any certificate,
report or other document made or delivered pursuant hereto, accounting terms
not otherwise defined herein, and accounting terms only partly defined herein,
to the extent not defined, shall have the respective meanings given to them
under GAAP. Unless otherwise defined herein, all terms used herein which are
defined by the Uniform Commercial Code shall have the same meanings as assigned
to them by the Uniform Commercial Code unless and to the extent varied by this
Agreement. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and article, section,
subsection, schedule and exhibit references are references to articles,
sections or subsections of, or schedules or exhibits to, as the case may be,
this Agreement unless otherwise specified. As used herein, the singular number
shall include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may
require. Reference to any one or more of the Financing Documents shall mean the
same as the foregoing may from time to time be amended, restated, substituted,
extended, renewed, supplemented or otherwise modified.
ARTICLE II
THE CREDIT FACILITY
SECTION 2.1 THE CREDIT FACILITY.
2.1.1 COMMITMENT. Subject to and in accordance with the
provisions of this Agreement, the Lender agrees to establish the Credit
Facility for the benefit of the Borrowers in the principal amount of Fifty
Million Dollars ($50,000,000). The obligation of the Borrowers to pay the
Credit Facility with interest shall be evidenced by the Note dated of even date
herewith executed by the Borrowers, as makers, in favor of the Lender, as
payee, in the principal amount of the Credit Facility.
2.1.2 PERMITTED USES. The sole purpose of the Credit Facility
shall be (a) to provide acquisition financing to the Borrowers in connection
with the purchase by the Borrowers and/or any Property Owner of one or more
Apartment Properties located within the continental United States and acquired
after the date of this Agreement, or (b) to provide proceeds in order to allow
the Borrowers or any Property Owner to refinance (which term shall be deemed to
include reimbursement to the Borrowers or to a Property Owner of sums paid
towards the Purchase Price of an Apartment Property, which were not derived
from a loan on such Apartment Property) any such Apartment Property acquired by
the Borrowers or such Property Owner after March 25, 1998. The amount advanced
by the Lender from the proceeds of the Credit Facility with respect to the
acquisition or refinancing of any particular Apartment Property shall in no
event exceed
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the lesser of (a) sixty-five percent (65%) of the Purchase Price paid for the
Apartment Property in question, or (b) $25,000,000.
SECTION 2.2 MATURITY. The Credit Facility shall mature and the entire
principal balance of the Credit Facility, together with all accrued and unpaid
interest thereon, shall be due and payable on the first day of the
thirty-seventh (37th) full calendar month from the Closing Date. The Lender
agrees to review the Credit Facility annually to determine whether the Lender
is willing to extend the term of the Credit Facility for an additional period
or periods of one year each, which determination shall be made in the sole and
absolute discretion of the Lender. In the event of a decision by the Lender to
offer an extension of the Credit Facility, the Borrowers' right to accept such
extension option shall be subject to the payment by the Borrowers, on or before
the first day of such extension term, of an extension fee in an amount equal to
ten (10) basis points on the full amount of the Credit Facility for each year
that the term of the Credit Facility is extended.
SECTION 2.3 GENERAL FINANCING PROVISIONS.
2.3.1 BORROWERS' REPRESENTATIVES. The Lender is hereby
irrevocably authorized by the Borrowers to make Advances under the Credit
Facility to the Borrowers pursuant to the provisions of this Agreement upon the
written, oral or telephone request of any one of the Persons who is from time
to time an Authorized Representative of the Borrowers under the provisions of
this Agreement. The Lender assumes no responsibility or liability for any
errors, mistakes, and/or discrepancies by such Authorized Representative in the
oral, telephonic, written or other transmissions of any instructions, orders,
requests and confirmations between the Lender and the Borrowers in connection
with the Credit Facility or any provisions of this Agreement.
2.3.2 USE OF PROCEEDS. The proceeds of each Advance under the
Credit Facility shall be used by the Borrowers only for the purposes herein
specified and as specified in the requisition pursuant to which such proceeds
were advanced, and for no other purpose except as may otherwise be agreed to by
the Lender in writing. The Borrowers shall use the proceeds of each Advance
promptly.
2.3.3 COMMITMENT FEE. The Borrowers shall pay to the Lender on or
before the Closing Date, a loan origination fee (the "Commitment Fee") in an
amount equal to $125,000. The Commitment Fee has been fully earned and is
non-refundable. THE BORROWERS ACKNOWLEDGE AND AGREE THAT THE COMMITMENT FEE IS
PAID IN CONSIDERATION OF THE LENDER'S PROCESSING OF THE BORROWERS' CREDIT
APPLICATION, AND THE ESTABLISHMENT OF THE CREDIT FACILITY, AND IS
NON-REFUNDABLE, NOTWITHSTANDING THE FAILURE OF THE LENDER TO MAKE ANY ADVANCE
UNDER THE CREDIT FACILITY. Notwithstanding the foregoing, in the event that the
Credit Facility or any Advance hereunder is refinanced in full at any time
during the term of the Credit Facility through another credit facility
established on the Borrowers' or any Property Owner's behalf by the Lender or
FMMC, a portion of the foregoing commitment fee, in an amount equal to the
product of .0025 times the lesser of (a) the amount of the Advance or Advances
being repaid at the time of such refinancing, or (b) the amount of such
refinancing,
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shall either be rebated to the Borrowers at the time of the consummation of
such transaction or the amount of any commitment fee or loan origination fee
due in connection with such refinancing shall be reduced by such amount;
provided, however, that in no event shall the aggregate amount rebated or
credited to the Borrowers exceed the full amount of the Commitment Fee.
2.3.4 COMPUTATION OF INTEREST AND FEES. All applicable Fees and
interest shall be calculated on the basis of a year of 360 days for the actual
number of days elapsed.
2.3.5 PAYMENTS. All payments of the Obligations, including,
without limitation, principal, interest, prepayments, late charges, Fees and
Enforcement Costs, shall be paid by the Borrowers without setoff, recoupment or
counterclaim to the Lender at the Lender's office specified in the Note in
immediately available funds not later than 12:00 noon, Baltimore, Maryland time
on the due date of such payment. All payments shall be applied first to any
unpaid Fees, second to any and all accrued and unpaid late charges and
Enforcement Costs, third to any and all accrued and unpaid interest on the
Obligations, and then to principal, all in such order and manner as shall be
determined by the Lender in its sole and absolute discretion; provided,
however, that so long as no Event of Default shall have occurred, which remains
uncured, the Borrowers shall have the right to designate the Advance or
Advances to which any principal prepayment shall be applied.
2.3.6 LIENS; SETOFF. Each of the Borrowers hereby grants to the
Lender a continuing Lien for all of the Obligations upon any and all monies,
securities, and other property of the Borrowers, or any of them, and the
proceeds thereof, now or hereafter held or received by or in transit to, the
Lender from or for the Borrowers, or any of them, exclusive of any sums
(including items awaiting collection) now or hereafter on deposit in the
Restricted Accounts, and also upon any and all deposit accounts (general or
special) and credits of the Borrowers, or any of them, with the Lender or any
affiliate of the Lender, at any time existing, excluding the Restricted
Accounts and any deposit accounts held by the Borrowers in their capacity as
trustee for Persons who are not Affiliates or Subsidiaries of the Borrowers.
Without implying any limitation on any other rights the Lender may have under
the Financing Documents or applicable Laws, during the continuance of an Event
of Default, the Lender is hereby authorized by the Borrowers at any time and
from time to time, without notice to the Borrowers, to set off, appropriate and
apply any or all items hereinabove referred to against all Obligations then
outstanding, all in such order and manner as shall be determined by the Lender
in its sole and absolute discretion.
2.3.7 REQUIREMENTS OF LAW. In the event that the Lender shall
have determined in good faith that (a) the adoption of any Laws regarding
capital adequacy, or (b) any change therein or in the interpretation or
application thereof or (c) compliance by the Lender or any corporation
controlling the Lender with any request or directive regarding capital adequacy
(whether or not having the force of Law) from any central bank or Governmental
Authority, does or shall have the effect of reducing the rate of return on the
Lender's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which the Lender or such corporation would have
achieved but for such adoption, change or compliance (taking into consideration
the Lender's or such corporation's policies with respect to capital adequacy)
by an amount
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deemed by the Lender to be material, then from time to time, after submission
by the Lender to the Borrowers of a written request therefor and a statement of
the basis for such determination, the Borrowers shall pay to the Lender such
additional amount or amounts in order to compensate for such reduction.
ARTICLE III
ADVANCE PROCEDURES; COLLATERAL
SECTION 3.1 SUPPORTING DOCUMENTATION FOR EACH ADVANCE UNDER THE CREDIT
FACILITY. The Borrowers' right to requisition, and the Lender's obligation to
make, any Advance under the Credit Facility with respect to the acquisition or
refinancing of any Apartment Property shall be expressly subject to the
Lender's receipt and approval of each of the following items relating to the
Apartment Property in question, which must be in all respects acceptable to the
Lender and its counsel, in their reasonable discretion:
(a) A copy of the executed contract of sale pursuant to which the
Apartment Property in question was or shall be acquired, the seller under which
must be a party not related to or affiliated with any of the Borrowers or any
of the Property Owners and which must reflect a bona fide purchase and sale
transaction, for fair consideration.
(b) If such Apartment Property is to be acquired by an entity
other than one of the Borrowers, a certified copy of the organizational
documents for the Property Owner acquiring title to such Apartment Property,
appropriate resolutions of such Property Owner authorizing the acquisition of
such Apartment Property and the execution and delivery of the documents
required to be executed in connection therewith, and, if applicable, a good
standing certificate for such Property Owner.
(c) A current survey of such Apartment Property and any recorded
subdivision plat relating thereto. The survey shall be certified to the title
company insuring title to such Apartment Property and to the Lender and shall
show dimensions and locations of all improvements and easements, rights of way,
adjoining sites, encroachments and the extent thereof, established building
lines and street lines, and distance to, and names of the nearest intersecting
streets and such other details as the Lender may reasonably request.
(d) A mortgagee title insurance binder with a commitment to issue
a title insurance policy in ALTA Form 1992 insuring the lien of the Deed of
Trust applicable to such Apartment Property, subject only to those exceptions
to title as are reasonably approved by the Lender and its counsel, and with
affirmative insurance on such matters as the Lender may reasonably require. The
title binder shall be issued by a company acceptable to the Lender, and shall
contain such terms and coverage as the Lender and its counsel shall deem
acceptable. The mortgagee title insurance policy when issued shall not contain
a survey exception, except as to matters depicted on the survey and approved by
the Lender. The Lender reserves the right to require commitments for
reinsurance and direct access in amounts and from insurers acceptable to the
Lender.
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(e) Not less than five (5) days prior to any request by the
Borrowers for an Advance under the Credit Facility, evidence satisfactory to
the Lender regarding the current and past pollution control practices at such
Apartment Property in connection with the discharge, emission, handling,
disposal or existence of Hazardous Materials, which shall include a phase I
environmental audit of such Apartment Property prepared by a person or firm
acceptable to the Lender having minimum professional liability insurance
coverage of at least $1,000,000 or such greater amount as the Lender may
require under the circumstances and who or which shall have furnished to the
Lender a reliance letter or other satisfactory evidence of the Lender's right
to rely on the findings contained in such environmental audit.
(f) A report prepared by an engineer selected by the Borrowers,
but approved by the Lender, and in form and substance satisfactory to the Lender
in all respects covering the structural integrity of the improvements located on
such Apartment Property and the condition of all mechanical systems therein and
certifying that such improvements, as constructed, comply with all applicable
legal requirements regarding access and facilities for handicapped or disabled
persons for facilities of that type and age and taking into account such
alternative accommodations as may be permitted by law, including, without
limitation and to the extent applicable, The Federal Architectural Barriers Act
(42 U.S.C. section 4151 et seq.), The Fair Housing Amendments Act of 1988 (42
U.S.C. section 3601 et seq.), The Americans With Disabilities Act of 1990 (42
U.S.C. section 12101 et seq.), The Rehabilitation Act of 1973 (29 U.S.C. section
794) and any applicable state statutes relating to access and facilities for
handicapped or disabled persons. The Borrowers shall covenant and agree, at
their sole cost and expense, to make all repairs and improvements to the
Apartment Property required by such engineer in the foregoing inspection report
which are necessary to correct any health and/or safety violations or
deficiencies expressed by such engineer or which are necessary to maintain the
structural integrity of the Improvements, which repairs and improvements shall
be made in a manner and within a time frame reasonably acceptable to the Lender
in all respects.
(g) Insurance policies evidencing to the Lender's satisfaction
that the Borrowers maintain the following insurance coverages with respect to
the Apartment Property in question (which may be effected by so-called
"blanket" policies insuring the Borrowers, the Property Owners and all other
Affiliates and Subsidiaries of any of the Borrowers and their respective
properties):
(i) Fire and extended coverage insurance, including vandalism
and malicious mischief endorsements, covering such Apartment Property in the
form of an "all risk", 100% non-reporting policy and containing such other
extended coverage as may be required by the Lender in an amount to be
designated by the Lender as to the insurable value of such Apartment Property.
Such policy shall indicate the Lender's interest as first mortgagee and loss
payee with respect to such Apartment Property, shall prohibit cancellation or
reduction in coverage upon less than thirty (30) days prior written notice to
the Lender and shall be in form and issued by companies acceptable to the
Lender. In no event shall such insurance contain a co-insurance provision;
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(ii) Public liability and property damage insurance coverage
for the Borrowers and the Property Owner acquiring title to such Apartment
Property. Such insurance shall be issued in limits of not less than $1,000,000
for any one occurrence and $2,000,000 for the aggregate of all occurrences
during any given policy period, with umbrella coverage of not less than
$10,000,000, shall be in form and issued by companies acceptable to the Lender,
shall name the Lender as an additional insured and shall prohibit cancellation
or reduction in coverage upon less than thirty (30) days prior written notice
to the Lender; and
(iii) Loss of rental value insurance or business interruption
insurance in an amount, in form and issued by companies acceptable to the
Lender in all respects.
(h) If such Apartment Property is in an area that has been
identified by the Federal Emergency Management Agency as having special flood
and mud slide hazards and in which the sale of flood insurance has been made
available under the Flood Disaster Protection Act of 1973, a flood insurance
policy in form satisfactory to the Lender. In the event such Apartment Property
is not in an area having special flood and mud slide hazards, the Borrowers
shall deliver to the Lender, evidence satisfactory to the Lender that flood
insurance is not required by the terms hereof.
(i) Operating statements for such Apartment Property as of the
close of the immediately preceding fiscal year, and for the period commencing
with the current fiscal year and ending with the most recent fiscal quarter, in
form and detail satisfactory to the Lender, a current rent roll and rent aging
schedule for such Apartment Property, in form and detail satisfactory to the
Lender, and an operating budget and a discounted cash flow analysis prepared by
the Borrowers and operating expense detail, which confirms the fairness of the
Purchase Price paid or to be paid for such Apartment Property, in form and
detail satisfactory to the Lender.
(j) Such other information, materials, documents, instruments and
agreements relating to such Apartment Property as the Lender may reasonably
require.
SECTION 3.2 ADDITIONAL CONDITIONS FOR ADVANCES. At the time of each
Advance by the Lender of any portion of the proceeds of the Credit Facility
relating to the acquisition or refinancing of any Apartment Property, the
Borrowers shall deliver or cause to be delivered to the Lender, each of the
following, which must be acceptable to the Lender in all respects:
(a) An original Deed of Trust covering the fee simple or
leasehold (so long as the terms thereof are satisfactory to the Lender)
interest in the Apartment Property to be acquired or refinanced at such time,
constituting a first perfected lien on such Apartment Property and all
fixtures, equipment, chattels and building materials located therein or
pertaining thereto. The lien of the Deed of Trust shall secure a principal sum
equal to the greater of (i) the amount of the Advance made by the Lender with
respect to the Apartment Property in question, or (ii) seventy percent (70%) of
the Purchase Price of such Apartment Property. The Deed of Trust shall prohibit
any transfer, sale, encumbrance or alienation of all or any part of such
Apartment Property without the prior written consent of the Lender; excluding,
however, the
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execution of tenant leases in the ordinary course of business and other
permitted encumbrances expressly set forth in the Deed of Trust.
(b) An original Assignment of Leases executed by the Borrowers or
the Property Owner acquiring title to such Apartment Property pursuant to which
all rents, income, profits and leases arising out of or connected with such
Apartment Property shall be assigned to the Lender as additional security for
the payment and performance of the Obligations.
(c) An original Guaranty executed by the Property Owner (if
different from the Borrowers) acquiring title to such Apartment Property
pursuant to which such Property Owner shall unconditionally and irrevocably
guaranty repayment of the Credit Facility and performance of all obligations of
the Borrowers under the Financing Documents.
(d) An original Environmental Indemnification executed by the
Borrowers and the Property Owner acquiring title to such Apartment Property
pursuant to which the Borrowers and such Property Owner shall indemnify the
Lender and hold the Lender harmless from and against all losses, costs and
damages arising out of or connected with the presence of Hazardous Materials on
or emanating from such Apartment Property.
(e) A written opinion of counsel for the Borrowers and the
Property Owner in question, satisfactory in scope and substance to the Lender,
covering such matters as the Lender may deem necessary, including without
limitation, opinions as to the validity, binding effect and enforceability of
such Deed of Trust, Assignment of Leases, Guaranty and Environmental
Indemnification (subject to reasonable and customary qualifications,
limitations, exceptions and assumptions).
(f) Such other documents, instruments and agreements (including
one or more financing statements substantially in the form of Exhibit G
attached hereto and made a part hereof), relating to such Apartment Property as
the Lender may reasonably require.
SECTION 3.3 APPRAISALS. At the time of each Advance by the Lender of
any portion of the proceeds of the Credit Facility relating to the acquisition
or refinancing of any Apartment Property, the Lender shall have the right to
obtain an appraisal of such Apartment Property from an appraiser designated by
the Lender and approved by the Borrowers, addressed to the Lender and its
assigns, which, when reviewed by the Lender and by FMMC, must indicate a value
in such Apartment Property equal to not less than 1.34 times the amount of the
Advance made or to be made by the Lender with respect to such Apartment
Property. The basis of the appraisal calculations shown on such appraisal
reports and all other aspects of the appraisal reports must be satisfactory to
the Lender and FMMC in all respects. The Borrowers shall reimburse the Lender
upon demand for all costs and expenses incurred by the Lender and/or FMMC with
respect to the preparation and review of each appraisal required pursuant to
the terms hereof. If requested by the Borrowers prior to the receipt by the
Lender of any such appraisal, and so long as the Borrowers shall execute a
release, in a form reasonably acceptable to the Lender, pursuant to which the
Lender shall be released in full from any liability arising out of the
Borrowers
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reliance on the conclusions contained therein, the Lender shall endeavor to
obtain, at the Borrower's expense, a separate copy of such appraisal addressed
to the Borrowers. In the event that, upon the receipt of any such appraisal,
the value of the Apartment Property in question, as determined by the Lender
based upon its review of such appraisal, is less than that required pursuant to
the terms hereof, the Borrowers shall pay to the Lender within thirty (30) days
of written demand by the Lender, a principal curtailment on the Credit Facility
in an amount equal to the difference between the amount of the Advance made by
the Lender with respect to such Apartment Property and seventy-five percent
(75%) of the actual appraised value of such Apartment Property, as determined
by the Lender based upon such appraisal.
SECTION 3.4 DEBT AND OBLIGATIONS SECURED. All property and Liens
assigned, pledged or otherwise granted under or in connection with this
Agreement or any of the other Financing Documents shall secure (a) the payment
of all of the Obligations, and (b) the performance, compliance with and
observance by the Borrowers and the Property Owners of the provisions of this
Agreement and all of the other Financing Documents or otherwise under the
Obligations.
SECTION 3.5 TITLE AND RECORD SEARCHES. As of the date of each Advance,
the Lender shall have the right to receive, in form and substance satisfactory
to the Lender, such additional Lien, title and record searches with respect to
the Collateral, the Borrowers and/or any other Person, as appropriate, showing
that the Liens of the Financing Documents then in existence remain and will
continue to be a perfected Lien on the Collateral covered thereby subject only
to Permitted Liens or to such other matters as the Lender may approve,
including without limitation, endorsements to the mortgagee's title insurance
policies covering each of the parcels comprising the Property, in form and
substance satisfactory to the Lender and issued by a title insurance company or
companies satisfactory to the Lender.
SECTION 3.6 COSTS. The Borrowers hereby jointly and severally covenant
and agree to pay, as part of the Enforcement Costs and to the fullest extent
permitted by applicable Laws, on demand all costs, fees and expenses incurred
by the Lender in connection with the taking, perfection, preservation,
protection and/or release of any Lien on the Collateral, including without
limitation, (a) customary fees and expenses incurred in preparing the Financing
Documents from time to time (including, without limitation, reasonable
attorneys' fees), (b) all filing and/or recording taxes or fees, (c) all title
insurance premiums and costs, (d) all costs of Lien and record searches, (e)
reasonable attorneys' fees in connection with all legal opinions required, (f)
appraisal and/or survey costs, and (f) all other related costs, fees and
expenses.
SECTION 3.7 RELEASES. Provided no Event of Default shall have
occurred, which remains uncured, the Lender agrees to release individual
Apartment Properties from the lien of the Deed of Trust covering the same upon
the payment to the Lender for each such Apartment Property to be released of
the full amount of the Advance made by the Lender under the Credit Facility
with respect to the acquisition or refinance of such Apartment Property. Such
sum shall be applied at the Lender's option either to accrued and unpaid
interest or to the outstanding principal balance of the Credit Facility. In
addition, the Borrowers shall pay to the Lender, at the time of each such
release, a release and notary fee in the amount of $25.00 if the release
instrument is delivered to the Lender for execution or $35.00 if the Lender is
required to prepare
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the release instrument. At the time of the release by the Lender of any
Apartment Property from the lien of the Deed of Trust covering the same, the
Lender shall also release the Property Owner which owns such Apartment Property
from the effect of its Guaranty and from the effect of the other Financing
Documents to which such Property Owner is a party.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES. Each of the Borrowers
represents and warrants to the Lender, and shall be deemed to represent and
warrant at the time of each request for an Advance under the Credit Facility
pursuant to the terms of this Agreement, and again at the time of the making of
any Advance under the Credit Facility, as follows:
4.1.1 SUBSIDIARIES. The Borrowers have the Subsidiaries and
Affiliates listed on Exhibit A attached hereto and made a part hereof (as the
same may be updated through the date of such Advance) and no others. Such
schedule correctly indicates the nature and amount of the Borrowers' ownership
interests therein.
4.1.2 GOOD STANDING. Each of the Borrowers and its Subsidiaries
and Affiliates (a) is duly organized and validly existing, and, if applicable,
in good standing, under the laws of the jurisdiction of its organization, (b)
has the trust, corporate or partnership (as the case may be) power to own its
property and to carry on its business as now being conducted, and (c) is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned by it therein or in which the transaction
of its business makes such qualification necessary.
4.1.3 POWER AND AUTHORITY. Each of the Borrowers and the Property
Owners has full trust, corporate or partnership, as the case may be, power and
authority to execute and deliver this Agreement and the other Financing
Documents to which it is a party, to make the borrowings under this Agreement,
and to incur and perform the Obligations whether under this Agreement, the
other Financing Documents or otherwise, all of which have been duly authorized
by all proper and necessary trust, corporate or partnership, as the case may
be, action. No consent or approval of shareholders, partners or any creditors
of any of the Borrowers or any of the Property Owners, and no consent,
approval, filing or registration with or notice to any Governmental Authority
on the part of any of the Borrowers or any of the Property Owners, is required
as a condition to the execution, delivery, validity or enforceability of this
Agreement or the other Financing Documents or the payment and performance by
the Borrowers of the Obligations.
4.1.4 BINDING AGREEMENTS. This Agreement and the other Financing
Documents executed and delivered by the Borrowers and each Property Owner which
is a party thereto have been properly executed and delivered and constitute the
valid and legally binding obligations of such Persons and are fully enforceable
against such Persons in accordance with their respective terms.
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4.1.5 NO CONFLICTS. Neither the execution, delivery and
performance of the terms of this Agreement or of any of the other Financing
Documents executed and delivered by the Borrowers or any of the Property Owners
nor the consummation of the transactions contemplated thereby will conflict
with, violate or be prevented by (a) the Borrowers' organizational documents,
(b) the organizational documents of any of the Property Owners, (c) any
existing mortgage, indenture, contract or agreement binding on any of the
Borrowers or any of the Property Owners or affecting any of its or their
property, or (d) any Laws.
4.1.6 NO DEFAULTS, VIOLATIONS. No Default or Event of Default has
occurred and is continuing. None of the Borrowers nor any Subsidiary or
Affiliate of any of the Borrowers is in default under or with respect to any
obligation under any existing mortgage, indenture, contract or agreement
binding on it or affecting its property in any respect which could be
materially adverse to the business, operations, property or financial condition
of any of the Borrowers or any of the Subsidiaries or Affiliates of any of the
Borrowers, or which could materially adversely affect the ability of any of the
Borrowers or any of the Property Owners to perform its obligations under this
Agreement or the other Financing Documents to which any of the Borrowers or any
of the Property Owners is a party.
4.1.7 COMPLIANCE WITH LAWS. None of the Borrowers nor any of the
Subsidiaries or Affiliates of any of the Borrowers is in violation, in any
material respect, of any applicable Laws (including, without limitation, any
Laws relating to employment practices or to environmental, occupational or
health standards and controls) or any order, writ, injunction, decree or demand
of any court, arbitrator, or any Governmental Authority affecting any of the
Borrowers or any Subsidiary or Affiliate of any of the Borrowers or any of its
or their properties, the violation of which, considered in the aggregate, could
materially adversely affect the business, operations or properties of any of
the Borrowers and/or of any of the Subsidiaries or Affiliates of any of the
Borrowers.
4.1.8 MARGIN STOCK. None of the proceeds of the Credit Facility
will be used, directly or indirectly, by the Borrowers or any Property Owner
for the purpose of purchasing or carrying, or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry,
any "margin security" within the meaning of Regulation G (12 CFR Part 207), or
"margin stock" within the meaning of Regulation U (12 CFR Part 221), of the
Board of Governors of the Federal Reserve System or for any other purpose which
might make the transactions contemplated in this Agreement a "purpose credit"
within the meaning of said Regulation G or Regulation U, or cause this
Agreement to violate any other regulation of the Board of Governors of the
Federal Reserve System or the Securities Exchange Act of 1934, as amended, or
the Small Business Investment Act of 1958, as amended, or any rules or
regulations promulgated under any of such statutes.
4.1.9 INVESTMENT COMPANY ACT; MARGIN SECURITIES. None of the
Borrowers nor any Property Owner is an investment company within the meaning of
the Investment Company Act of 1940, as amended, nor is it, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company within the meaning of said Act. None of the Borrowers nor
any Property Owner is engaged principally, or as one of its important
activities, in the
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business of extending credit for the purpose of purchasing or carrying "margin
security" within the meaning of Regulation G (12 CFR Part 207), or "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System.
4.1.10 LITIGATION. Except as otherwise disclosed to the Lender,
there are no proceedings, actions or investigations pending or, so far as any
of the Borrowers knows, threatened before or by any court, arbitrator or
Governmental Authority which, in any one case or in the aggregate, if
determined adversely to the interests of any of the Borrowers, any of the
Property Owners or any other Subsidiary or Affiliate of any of the Borrowers,
would have a material adverse effect on the business, properties, condition
(financial or otherwise) or operations, present or prospective, of any of the
Borrowers, of any of the Property Owners or of the Borrowers and the
Subsidiaries and Affiliates of the Borrowers taken as a whole.
4.1.11 FINANCIAL CONDITION. The consolidated financial statements
of the Borrowers dated December 31, 1997, are complete and correct and fairly
present the consolidated financial position of the Borrowers and their
Subsidiaries and Affiliates and the results of their operations and
transactions in their surplus accounts as of the date and for the period
referred to and have been prepared in accordance with GAAP applied on a
consistent basis throughout the period involved. There are no material
liabilities, direct or indirect, fixed or contingent, of the Borrowers or their
Subsidiaries or Affiliates as of the date of such financial statements which
are not reflected therein or in the notes thereto, other than leases executed
in the ordinary course of business. There has been no material adverse change
in the financial condition or operations of the Borrowers or their Subsidiaries
or Affiliates since the date of such financial statements and to the Borrowers'
knowledge no such adverse change is pending or threatened. None of the
Borrowers nor any Subsidiary or Affiliate of any of the Borrowers has
guaranteed the obligations of, or made any investment in or advances to, any
Person, except as disclosed in such financial statements, and except for the
endorsement of negotiable instruments for collection in the ordinary course of
business. The representations and warranties contained in this Section shall
also cover financial statements furnished from time to time to the Lender
pursuant to Section 6.1.1 of this Agreement.
4.1.12 FULL DISCLOSURE. The financial statements referred to in
Section 4.1.11 of this Agreement, the Financing Documents (including, without
limitation, this Agreement), and the statements, reports or certificates
furnished by the Borrowers in connection with the Financing Documents (a) do
not contain any untrue statement of a material fact and (b) when taken in their
entirety, do not omit any material fact necessary to make the statements
contained therein not misleading. There is no fact known to the Borrowers which
has not been disclosed to the Lender in writing prior to the date of this
Agreement with respect to the transactions contemplated by the Financing
Documents which materially and adversely affects or in the future could, in the
reasonable opinion of the Borrowers, materially adversely affect the condition,
financial or otherwise, results of operations, business, or assets of any of
the Borrowers or of any Property Owner.
4.1.13 FNMA DEBT. The Lender has received photocopies of all
material instruments and documents evidencing and/or securing the FNMA Debt,
together with any and
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all other material agreements, documents, or instruments securing, evidencing,
guarantying or otherwise executed and delivered in connection therewith. None
of the FNMA Debt Documents has been amended, supplemented, restated or
otherwise modified except as otherwise disclosed to the Lender in writing. In
addition, there does not exist any default or any event which upon notice or
lapse of time or both would constitute a default under the terms of any of the
FNMA Debt Documents.
4.1.14 TAXES AND IMPOSITIONS. Each of the Borrowers and each of
the Subsidiaries and Affiliates of the Borrowers has filed all returns, reports
and forms for Taxes and Impositions which, to the knowledge of the Borrowers,
are required to be filed, and has paid all Taxes and Impositions as shown on
such returns or on any assessment received by it, to the extent that such Taxes
and Impositions have become due, unless and to the extent only that such Taxes,
Impositions, assessments and governmental charges are currently contested in
good faith and by appropriate proceedings by the Borrowers or by the
appropriate Subsidiary or Affiliate of the Borrowers, such Taxes and
Impositions are not the subject of any Liens other than Permitted Liens, and
adequate reserves therefor have been established as required under GAAP. All
tax liabilities of the Borrowers and the Subsidiaries and Affiliates of the
Borrowers were as of the date of the audited financial statements referred to
in Section 4.1.11 above, and are now, adequately provided for on the books of
the Borrowers or their Subsidiaries and Affiliates, as appropriate. No tax
liability has been asserted by the Internal Revenue Service or any state or
local authority against the Borrowers or any of the Subsidiaries or Affiliates
of the Borrowers for Taxes or Impositions in excess of those already paid;
excluding, however, any tax liability of a non-material nature which would not
impair the ability of the Borrowers or any of the Property Owners to pay and
perform their Obligations hereunder.
4.1.15 ERISA. With respect to any "pension plan" as defined in
Section 3(2) of ERISA, which plan is now or previously has been maintained or
contributed to by the Borrowers and/or by any commonly controlled entity: (a) no
"accumulated funding deficiency" as defined in Internal Revenue Code section 412
or ERISA section 302 has occurred, whether or not that accumulated funding
deficiency has been waived; (b) no Reportable Event has occurred; (c) no
termination of any plan subject to Title IV of ERISA has occurred; (d) none of
the Borrowers nor any commonly controlled entity (as defined under ERISA) has
incurred a "complete withdrawal" within the meaning of ERISA section 4203 from
any Multiemployer Plan; (e) none of the Borrowers nor any commonly controlled
entity has incurred a "partial withdrawal" within the meaning of ERISA section
4205 with respect to any Multiemployer Plan; (f) no Multiemployer Plan to which
any of the Borrowers or any commonly controlled entity has an obligation to
contribute is in "reorganization" within the meaning of ERISA section 4241 nor
has notice been received by any of the Borrowers or any commonly controlled
entity that such a Multiemployer Plan will be placed in "reorganization".
4.1.16 TITLE TO PROPERTIES. Each of the Borrowers and each of the
Subsidiaries and Affiliates of each of the Borrowers has good and marketable
title to all of its material properties and assets, including, without
limitation, the Collateral and the properties and assets reflected in the
balance sheets described in Section 4.1.11 above. All of such properties and
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assets, including, without limitation the Collateral, which were purchased,
were purchased for fair consideration and reasonably equivalent value in the
ordinary course of business.
4.1.17 PATENTS, TRADEMARKS, ETC. Each of the Borrowers and each
of the Property Owners owns, possesses, or has the right to use all necessary
patents, patent rights, licenses, trademarks, trademark rights, trade names,
trade name rights, logos, copyrights, permits and franchises to own its
properties and conduct its business as now conducted, without known conflict
with the rights of any other Person. Any and all obligations to pay royalties
or other charges with respect to such properties and assets are properly
reflected on the financial statements described in Section 4.1.11 above.
4.1.18 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS
CONTAMINATION. To the best of the Borrowers' knowledge, and except as otherwise
disclosed to the Lender in any environmental assessment obtained by the Lender
in connection with the Credit Facility or otherwise disclosed in writing by the
Borrowers to the Lender, (a) no Hazardous Materials are located on any of the
Apartment Properties, except for reasonable quantities of necessary supplies
for use by such Persons in the ordinary course of their current lines of
business and which are stored, used and disposed of in accordance with all
applicable Laws; and (b) no property owned, controlled or operated by any of
the Borrowers or any of the Subsidiaries or Affiliates of any of the Borrowers,
has ever been used as a manufacturing, storage, or dump site for Hazardous
Materials nor is affected by Hazardous Materials Contamination which would have
or cause a material adverse effect on the business, properties or condition
(financial or otherwise) of the Borrowers and their Subsidiaries and Affiliates
taken as a whole.
4.1.19 PERFECTION AND PRIORITY OF COLLATERAL. The Lender has, or
upon execution of this Agreement and the other Financing Documents and, if
required, the recording of the same, will have, and will continue to have as
security for the Obligations, a valid and perfected Lien on, and security
interest in, all of the Collateral, free of all other Liens, claims and rights
of third parties whatsoever except Permitted Liens.
4.1.20 PLACES OF BUSINESS AND LOCATION OF COLLATERAL. The chief
executive office of each of the Borrowers is located in Baltimore, Maryland and
all books and records pertaining to the Collateral are located at the address
specified in Section 8.1 hereof.
4.1.21 INSURANCE. Each of the Borrowers and their Subsidiaries
and 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
business providing coverages against such casualties and contingencies and of
such types and in such amounts (and with co-insurance and deductibles) as is
customary for the same or similar businesses. None of the Borrowers nor any of
their Subsidiaries or Affiliates has received any notice from any insurer or
its agent requiring any action with respect to any matter or canceling or
threatening to cancel any policy of insurance (other than on the stated
expiration date thereof), and, to the knowledge of the Borrowers, all
requirements of all insurance policies have been satisfied.
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4.1.22 SOLVENCY. On the Closing Date and on the date of each
Advance under the Credit Facility (a) the aggregate fair market value of the
assets of each of the Borrowers and each Subsidiary and Affiliate of each of
the Borrowers exceeds its respective liabilities (whether contingent,
subordinated, unmatured, unliquidated, or otherwise), (b) each of the Borrowers
and each Subsidiary and Affiliate of each of the Borrowers has sufficient cash
flow to enable it to pay all Indebtedness as and when the same shall be due and
(c) each of the Borrowers and each Subsidiary and Affiliate of each of the
Borrowers has a sufficient amount of capital to conduct its business as
presently contemplated.
4.1.23 FISCAL YEAR. The fiscal year of each of the Borrowers and
each of the Subsidiaries and Affiliates of the Borrowers is January 1 through
December 31.
4.1.24 REIT STATUS. The Trust is and, since the date of its
formation, has been, in compliance with all requirements of the Internal
Revenue Code and all other applicable laws and regulations necessary to
establish and maintain REIT Status.
4.1.25 OWNERSHIP OF PARTNERSHIP INTERESTS. The Operating
Partnership owns a ninety-nine percent (99%) general partnership interest in
Property Company which owns a ninety-nine percent (99%) general partnership
interest in each of the Property Owners.
4.1.26 YEAR 2000 COMPLIANCE. Any reprogramming required to permit
the proper functioning in and following the year 2000, of (a) each of the
Borrower's and their Subsidiaries' and Affiliates' computer systems and (b)
equipment containing embedded microchips (including systems and equipment
supplied by others or with which such systems interface) and the testing of all
such systems and equipment so reprogrammed, will be completed by July 1, 1999.
The cost to each of the Borrower's and their Subsidiaries and Affiliates of
such reprogramming and testing and of the reasonably foreseeable consequences
of year 2000 to each of the Borrowers and their Subsidiaries and Affiliates
(including, without limitation, reprogramming errors and the failure of others'
systems or equipment) will not have a material adverse effect on the financial
condition or business operations of any of the Borrowers or any of their
Subsidiaries or Affiliates. Except for such of the reprogramming referred to in
the preceding sentence as may be necessary, the computer and management
information systems of each of the Borrowers and their Subsidiaries and
Affiliates are and, with ordinary course upgrading and maintenance, will
continue for the term of the Credit Facility to be, sufficient to permit each
of the Borrowers and their Subsidiaries and Affiliates to conduct its business
as currently conducted.
SECTION 4.2 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained in or made under or in connection
with this Agreement and the other Financing Documents shall survive the Closing
Date, the making of any Advance under the Credit Facility, and the incurring of
any other Obligations.
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ARTICLE V
CONDITIONS PRECEDENT FOR ADVANCES
SECTION 5.1 CONDITIONS TO ALL EXTENSIONS OF CREDIT. The making of
all Advances under the Credit Facility is subject to the fulfillment of the
following conditions precedent in a manner satisfactory to the Lender:
5.1.1 COMPLIANCE. Each of the Borrowers and each of the Property
Owners shall have complied and shall then be in compliance with all terms,
covenants, conditions and provisions of this Agreement (including without
limitation, the terms, covenants, conditions and provisions of Article III
hereof) and the other Financing Documents which are binding upon it.
5.1.2 DEFAULT. There shall exist no Default or Event of Default
hereunder.
5.1.3 REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Agreement and in the other Financing Documents
shall be true and correct in all material respects, with the same effect as
though such representations and warranties had been made at the time of the
making of each advance under the Credit Facility, except that the
representations and warranties pertaining to balance sheets, financial
statements and other financial condition information or data shall refer to the
latest balance sheets, financial statements, and financial condition
information and data furnished to the Lender pursuant to the provisions of this
Agreement.
5.1.4 ADVERSE CHANGE. No material adverse change shall have
occurred in the financial condition of any of the Borrowers, of any of the
Property Owners or of the Subsidiaries and Affiliates of any of the Borrowers,
taken as a whole, which would, in the good faith judgment of the Lender,
materially impair the ability of the Borrowers to pay or perform any of the
Obligations.
5.1.5 LEGAL MATTERS. All legal documents incident to each advance
under the Credit Facility shall be reasonably satisfactory to the Lender and,
if deemed necessary, counsel for the Lender.
SECTION 5.2 LENDER'S RIGHT TO TERMINATE ADVANCES. Notwithstanding
anything contained herein to the contrary, the Lender shall have the right, in
its sole and absolute discretion, to terminate its obligation to make any
further Advances under the Credit Facility (as distinct from accelerating the
maturity of the Credit Facility), without prior notice to or consent of the
Borrowers, upon the happening of any of the following:
(a) The acquisition by any Person or any group of affiliated
Persons, either directly or indirectly (through purchase, redemption or
otherwise) of (i) more than twenty-five percent (25%) of all of the ownership
interests in any of the Borrowers or in any of the Subsidiaries or Affiliates
of any of the Borrowers or in any class of stock or other interests of any of
the foregoing, if the effect of the same would or could alter the existing
management and/or
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control of any of the Borrowers or of any Subsidiary or Affiliate of any of the
Borrowers, as determined by the Lender in its sole but reasonable discretion,
or (ii) more than fifty percent (50%) of all of the ownership interests in any
of the Borrowers or in any of the Subsidiaries or Affiliates of any of the
Borrowers or in any class of stock or other interests of any of the foregoing;
excluding, however, the sale or transfer of all of the interests in one or more
of the Subsidiaries or Affiliates of any of the Borrowers (whether now existing
or hereafter owned) in order to effectuate a sale of the real property owned by
such Subsidiary or Affiliate, so long as immediately following each such sale
or transfer the Borrowers or their Subsidiaries and Affiliates shall continue
to maintain 100% ownership of at least thirty-one (31) of the thirty-six
operating properties listed on Exhibit B attached hereto and made a part
hereof; or
(b) Any of the Borrowers or any Subsidiary or Affiliate of
any of the Borrowers shall create, incur, assume or suffer to exist any
Indebtedness for Borrowed Money, except (i) the Obligations, (ii) other
obligations in favor of the Lender, (iii) indebtedness of Affiliates or
Subsidiaries of the Borrowers that are not Property Owners provided such
indebtedness is non-recourse to the Borrowers (other than customary exceptions
to such non- recourse provisions), (iv) the FNMA Debt, which shall be deemed to
include "Future Advances" thereunder after the date hereof as set forth in the
FNMA Debt Documents, provided the aggregate outstanding indebtedness thereunder
shall not exceed $375,000,000, unless, subject to the requirements of Section
6.1.12 below, the maximum indebtedness permitted thereunder is increased
pursuant to the provisions of the FNMA Debt Documents, as the same exist on the
date hereof, (v) indebtedness secured by any mortgage, encumbrance or other
lien upon, or security interest in, any property (excluding inventory), or
interest therein, hereafter acquired; provided, however, that (1) the
indebtedness secured by any such mortgage, encumbrance, lien or security
interest so created, assumed or existing shall not exceed 100% of the cost of
the property covered thereby to the entity acquiring the same, and (2) each
such mortgage, encumbrance, lien or security interest shall attach only to the
property so acquired and proceeds thereof and (3) the acquisition to which any
such mortgage, encumbrance, lien or security interest relates shall not result
in a default under any other provision of this Agreement, and (vi) other
indebtedness not exceeding $500,000 in the aggregate; or
(c) The failure of Alfred Lerner and Harvey Schulweis, at any
time during the term of the Credit Facility, to own directly or indirectly in
the aggregate partnership units in the Operating Partnership which are
convertible into at least 2,350,000 shares of the Trust; provided, however,
that nothing herein contained shall prohibit (i) the conversion of all or any
portion of the direct or indirect interests of Alfred Lerner or Harvey
Schulweis in the Operating Partnership to shares of the Trust as currently
permitted by the organizational documents of the Borrowers so long as none of
the shares in the Trust so acquired shall thereafter be sold, assigned,
transferred, encumbered or otherwise conveyed; and (ii) the transfer of
interests in the Trust and/or the Operating Partnership to immediate family
members of Alfred Lerner or Harvey Schulweis or trusts for the benefit of
Alfred Lerner, Harvey Schulweis or such family members, or upon the death of
Alfred Lerner or Harvey Schulweis so long as no material adverse change, as
reasonably determined by the Lender, shall result in the management of the
Trust as a consequence thereof or in connection therewith, whether concurrently
therewith or subsequent thereto; or
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<PAGE> 27
(d) The failure of the Borrowers or their Subsidiaries and
Affiliates to maintain at all times during the term of the Credit Facility 100%
ownership of at least thirty-one (31) of the thirty-six operating properties
listed on Exhibit B attached hereto and made a part hereof.
ARTICLE VI
COVENANTS OF THE BORROWERS
SECTION 6.1 AFFIRMATIVE COVENANTS. So long as any of the Obligations
shall be outstanding hereunder, each of the Borrowers covenants and agrees with
the Lender as follows:
6.1.1 FINANCIAL STATEMENTS. Each of the Borrowers shall furnish
to the Lender:
(a) As soon as available, but in no event more than one
hundred twenty (120) days after the close of each of the Borrowers' fiscal
years, (i) a copy of the annual audited, consolidated financial statement in
reasonable detail satisfactory to the Lender relating to the Borrowers and
their Subsidiaries and Affiliates, prepared in accordance with GAAP and
examined and certified by Ernst & Young, L.L.P. or another independent
certified public accountant satisfactory to the Lender, (ii) a consolidated
balance sheet of the Borrowers and their Subsidiaries and Affiliates as of the
end of such fiscal year and consolidated statements of income, cash flows and
changes in equity of the Borrowers and their Subsidiaries and Affiliates for
such fiscal year, certified as to accuracy by an Authorized Representative of
the Borrowers, (iii) management prepared operating statements for each
Subsidiary and Affiliate of the Borrowers owning any of the Apartment
Properties, any of the FNMA Debt Properties or any other income producing
property, certified as to accuracy by an Authorized Representative of the
Borrowers and in a format acceptable to the Lender, (iv) a management letter in
the form prepared by the independent certified public accountants, and (v) a
copy of the most recent form 10-K filed in accordance with United States
securities laws on behalf of the Trust.
(b) As soon as available, but in no event more than one
hundred twenty (120) days after the close of each of the Borrowers' fiscal
years, a certification by an Authorized Representative of the Borrowers stating
whether anything contained in the annual financial statements required above
has revealed the occurrence of a Default or an Event of Default under any of
the Financing Documents or FNMA Debt Documents, and, if so, stating the facts
with respect thereto.
(c) As soon as available, but in no event more than
forty-five (45) days after the close of each of the Borrowers' fiscal quarters,
a copy of the most recent form 10-Q filed in accordance with the United States
securities laws on behalf of the Trust.
(d) Promptly upon the filing or making thereof, at least one
(1) copy of all other financial statements, reports, notices and proxy
statements sent by the Trust to its stockholders or by the Operating
Partnership to its partners, and of all regular and other reports
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filed by any of the Borrowers with any securities exchange or with the
Securities and Exchange Commission.
(e) Within sixty (60) days after the end of each fiscal
quarter during the term of the Credit Facility, individual operating statements
for each of the Apartment Properties, as of the close of such period and for
the period commencing with the first day of the fiscal year and ending with
such fiscal quarter, in form and detail reasonably satisfactory to the Lender
and certified as to accuracy by an Authorized Representative of each of the
Borrowers;
(f) Within thirty (30) days after the Lender's written
request therefor, which shall be made not more frequently than once in any
twelve (12) month period, current rent rolls for each of the Apartment
Properties, each of the FNMA Debt Properties and any other income producing
property owned by any of the Borrowers or any of the Subsidiaries or Affiliates
of any of the Borrowers, in form and detail satisfactory to the Lender, and
certified as to accuracy by an Authorized Representative of the Borrowers; and
(g) Promptly, such additional information, reports or
statements as the Lender may from time to time reasonably request.
6.1.2 RECORDKEEPING, RIGHTS OF INSPECTION. (a) Each of the
Borrowers shall maintain, and shall cause each of its Subsidiaries and
Affiliates to maintain, (i) a standard system of accounting in accordance with
GAAP, and (ii) proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its
properties, business and activities.
(b) Each of the Borrowers shall permit, and shall cause each
of its Subsidiaries and Affiliates to permit, authorized representatives of the
Lender to visit and inspect the properties of the Borrowers and of the Property
Owners, including the Apartment Properties, (i) to review, audit, check and
inspect the Collateral at any time with or without notice, (ii) to review,
audit, check and inspect the books of record of the Borrowers and of the
Property Owners at any time with (or at any time during the continuance of an
Event of Default without) notice and to make abstracts and photocopies thereof,
and (iii) to discuss the affairs, finances and accounts of the Borrowers and of
the Property Owners, with the officers, directors, employees and other
representatives of the Borrowers and of the Property Owners, all at such times
during normal business hours and other reasonable times and as often as the
Lender may reasonably request.
(c) Any and all costs and expenses incurred by, or on behalf
of, the Lender in connection with the conduct of any of the foregoing shall be
part of the Enforcement Costs and shall be payable to the Lender upon demand.
Each of the Borrowers acknowledges and agrees that such expenses may include,
but shall not be limited to, any and all out-of-pocket costs and expenses of
the Lender's employees and agents in, and when, travelling to the Borrowers'
facilities and the facilities of any of the Property Owners.
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6.1.3 EXISTENCE. Each of the Borrowers shall maintain, and cause
each of its Subsidiaries and Affiliates to maintain, its existence in good
standing in the jurisdiction in which it is organized and in each other
jurisdiction where it is required to register or qualify to do business if the
failure to do so in such other jurisdiction might have a material adverse
effect (a) on the ability of any of the Borrowers or of any of the Property
Owners to perform the Obligations, (b) on the conduct of the operations of the
Borrowers and the Subsidiaries and Affiliates of the Borrowers, taken as a
whole, (c) on the financial condition of the Borrowers and the Subsidiaries and
Affiliates of the Borrowers, taken as a whole, or (d) on the value of, or the
ability of the Lender to realize upon, the Collateral.
6.1.4 COMPLIANCE WITH LAWS. Each of the Borrowers shall comply,
and cause each of its Subsidiaries and Affiliates to comply, in all material
respects with all applicable Laws and observe the valid requirements of all
Governmental Authorities, the noncompliance with or the nonobservance of which
might have a material adverse effect (a) on the ability of any of the Borrowers
or any of the Property Owners to perform the Obligations, (b) on the conduct of
the operations of the Borrowers and the Subsidiaries and Affiliates of the
Borrowers taken as a whole, (c) on the financial condition of the Borrowers and
the Subsidiaries and Affiliates of the Borrowers taken as a whole, (d) on the
value of, or the ability of the Lender to realize upon, the Collateral.
6.1.5 PRESERVATION OF PROPERTIES. Each of the Borrowers will, and
will cause each Property Owner to, at all times (a) maintain, preserve, protect
and keep its properties, including the Apartment Properties, whether owned or
leased, in good operating condition, working order and repair (ordinary wear
and tear excepted), and from time to time will make all proper repairs,
maintenance, replacements, additions and improvements thereto needed to
maintain such properties in good operating condition, working order and repair,
and (b) do or cause to be done all things necessary to preserve and to keep in
full force and effect its material franchises, leases of real and personal
property, trade names, patents, trademarks and permits which are necessary for
the orderly continuance of its business; and each of the Borrowers will cause
each of their other Subsidiaries and Affiliates to, at all times (a) maintain,
preserve, protect and keep its properties, whether owned or leased, in good
operating condition, working order and repair (ordinary wear and tear
excepted), and from time to time will make all proper repairs, maintenance,
replacements, additions and improvements thereto needed to maintain such
properties in good operating condition, working order and repair, and (b) do or
cause to be done all things necessary to preserve and to keep in full force and
effect its material franchises, leases of real and personal property, trade
names, patents, trademarks and permits which are necessary for the orderly
continuance of its business, if the failure to do so by such Subsidiary or
Affiliate would have or cause a material adverse effect on the business,
properties or condition (financial or otherwise) of the Borrowers and their
Subsidiaries and Affiliates taken as a whole.
6.1.6 LINE OF BUSINESS. Each of the Borrowers will be Principally
Engaged, directly or indirectly, in the business of the acquisition, ownership,
development, construction, leasing, financing or management of multi-family
residential properties; and the Borrowers will cause each Property Owner to be
engaged solely in the business of the acquisition, ownership, development,
construction, leasing, financing or management of multi-family residential
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properties. As used in the preceding sentence, "Principally Engaged" means, as
of any date, which respect to any particular business in which a Person may be
engaged, that the value of the assets of such business on such date, calculated
in accordance with GAAP, is at least 51% of the value on such date of all of
the business assets of such Person on such date.
6.1.7 INSURANCE. Each of the Borrowers will, and will cause each
of the Property Owners to, at all times maintain with A- or better rated
insurance companies such insurance as is required by applicable Laws and such
other insurance, in such amounts, of such types and against such risks,
hazards, liabilities, casualties and contingencies as are usually insured
against in the same geographic areas by business entities engaged in the same
or similar business. Without limiting the generality of the foregoing, each of
the Borrowers will, and will cause each of the Property Owners to, keep
adequately insured all of its properties, including the Apartment Properties,
against loss or damage resulting from fire or other risks insured against by
extended coverage and maintain public liability insurance against claims for
personal injury, death or property damage occurring upon, in or about any
properties occupied or controlled by it, or arising in any manner out of the
businesses carried on by it, all in such commercially reasonably amounts as the
Lender shall reasonably deem necessary or appropriate from time to time. The
Borrowers shall deliver to the Lender on the Closing Date and thereafter not
less frequently than annually and on each date there is a material change in
the insurance coverage a certificate of an Authorized Representative of each of
the Borrowers containing a detailed list of the insurance then in effect and
stating the names of the insurance companies, the types, the amounts and rates
of the insurance, dates of the expiration thereof and the properties and risks
covered thereby. Within thirty (30) days after notice in writing from the
Lender, the Borrowers shall obtain such additional insurance as the Lender may
reasonably request. Each of the Borrowers will cause each of their other
Subsidiaries and Affiliates at all times to maintain with A- or better rated
insurance companies such insurance as is required by applicable Laws and such
other insurance, in such amounts, of such types and against such risks,
hazards, liabilities, casualties and contingencies, which, if not maintained
would have or cause a material adverse effect on the business, properties, or
condition (financial or otherwise) of the Borrowers and their Subsidiaries and
Affiliates taken as a whole.
6.1.8 TAXES AND IMPOSITIONS. Except to the extent that the
validity or amount thereof is being contested in good faith and by appropriate
proceedings, each of the Borrowers will, and will cause each of its
Subsidiaries and Affiliates to, pay and discharge all Taxes and Impositions
prior to the date when any interest or penalty would accrue for the nonpayment
thereof. Each of the Borrowers shall furnish to the Lender at such times as the
Lender may require proof satisfactory to the Lender of the making of payments
or deposits required by applicable Laws including, without limitation, payments
or deposits with respect to amounts withheld by the Borrowers and by the
Subsidiaries and Affiliates of the Borrowers from wages and salaries of
employees and amounts contributed by the Borrowers and by the Subsidiaries and
Affiliates of the Borrowers on account of federal and other income or wage
taxes and amounts due under the Federal Insurance Contributions Act, as
amended.
6.1.9 ERISA. Each of the Borrowers will, and will cause each of
its Subsidiaries and Affiliates to, comply with the funding requirements of
ERISA with respect to employee pen-
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<PAGE> 31
sion benefit plans for its respective employees. None of the Borrowers nor any
of the Subsidiaries or Affiliates of the Borrowers will permit with respect to
any employee benefit plan or plans covered by Title IV of ERISA (a) any
prohibited transaction or transactions under ERISA or the Internal Revenue
Code, which results, or may result, in any material liability of any of the
Borrowers or any of its or their Subsidiaries and Affiliates, or (b) any
Reportable Event if, upon termination of the plan or plans with respect to
which one or more such Reportable Events shall have occurred, there is or would
be any material liability of any of the Borrowers or any of their Subsidiaries
and Affiliates to the PBGC. Upon the Lender's request, the Borrowers will
deliver to the Lender a copy of the most recent actuarial report, financial
statements and annual report completed with respect to any "defined benefit
plan", as defined in ERISA.
6.1.10 NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE
DEVELOPMENTS. Each of the Borrowers shall promptly notify the Lender upon
obtaining knowledge of the occurrence of:
(a) Any Default or Event of Default;
(b) Any litigation instituted against any of the Borrowers
or any of the Property Owners (i) with respect to any claim involving any of
the Apartment Properties of more than Two Hundred Fifty Thousand Dollars
($250,000) in excess of any insurance coverage therefor or (ii) with respect to
any claim involving any of the Apartment Properties which is not covered by
insurance, of more than Two Hundred Fifty Thousand Dollars ($250,000), or any
other litigation instituted against any of the Borrowers or any Subsidiary or
Affiliate of any of the Borrowers (i) involving any claim of more than One
Million Dollars ($1,000,000) in excess of any insurance coverage therefor or
(ii) involving any claim which is not covered by insurance, of more than One
Million Dollars ($1,000,000), or the entry of any judgment or Lien against any
of Apartment Properties of more than Two Hundred Fifty Thousand Dollars
($250,000) in excess of the insurance coverage therefor or which is not
otherwise covered by insurance, or the entry of any judgment or Lien against
any of the other assets or properties of any of the Borrowers or any Subsidiary
or Affiliate of any of the Borrowers of more than One Million Dollars
($1,000,000) in excess of the insurance coverage therefor or which is not
otherwise covered by insurance;
(c) Any event, development or circumstance whereby the
financial statements furnished hereunder fail in any material respect to present
fairly, in accordance with GAAP, the financial condition and operational results
of the Borrowers and their Subsidiaries and Affiliates;
(d) Any judicial, administrative or arbitral proceeding
pending against any of the Borrowers or any of the Subsidiaries or Affiliates of
any of the Borrowers and any judicial or administrative proceeding known by any
of the Borrowers to be threatened against it or against any of its Subsidiaries
or Affiliates which, if adversely decided, could materially adversely affect the
financial condition or operations (present or prospective) of any of the
Borrowers, of any of the Property Owners or of the Borrowers and the
Subsidiaries and Affiliates of the Borrowers taken as a whole;
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(e) The receipt by any of the Borrowers or any Subsidiary or
Affiliate of any of the Borrowers of any notice, claim or demand from any
Governmental Authority which alleges that such Borrower or any such Subsidiary
or Affiliate is in violation of any of the terms of, or has failed to comply
with, any applicable Laws regulating its operation and business, including, but
not limited to, the Occupational Safety and Health Act and the Environmental
Protection Act, and where such violation or failure to comply could materially
adversely affect the financial condition or operations (present or prospective)
of any of the Borrowers, of any of the Property Owners or of the Borrowers and
the Subsidiaries and Affiliates of any of the Borrowers taken as a whole; and
(f) Any other development in the business or affairs of any of
the Borrowers or any of the Subsidiaries or Affiliates of any of the Borrowers
which may be materially adverse to the financial condition or operations
(present or prospective) of any of the Borrowers, of any of the Property Owners
or of the Borrowers and the Subsidiaries and Affiliates of any of the Borrowers
taken as a whole;
in each case describing in detail satisfactory to the Lender the nature thereof
and the action the Borrowers propose to take with respect thereto.
6.1.11 HAZARDOUS MATERIALS; CONTAMINATION. Each of the Borrowers
agrees to:
(a) Give notice to the Lender promptly upon acquiring
knowledge of the presence of any Hazardous Materials on any property owned or
controlled by any of the Borrowers or any of the Subsidiaries or Affiliates of
any of the Borrowers or for which any of them is responsible (provided that
such notice shall not be required for Hazardous Materials placed or stored on
such property in accordance with all applicable Laws in the ordinary course of
business) or of any Hazardous Materials Contamination with a full description
thereof;
(b) Promptly comply with any Laws requiring the removal,
treatment or disposal of Hazardous Materials or Hazardous Materials
Contamination and provide the Lender with satisfactory evidence of such
compliance;
(c) To the extent the estimated cost of any such remediation
relating to any one or more of the Apartment Properties exceeds $250,000, in
the reasonable determination of the Lender, or to the extent the estimated cost
of any such remediation relating to any of the other properties owned by any of
the Borrowers or any of the other Subsidiaries or Affiliates of any of the
Borrowers exceeds $1,000,000, in the reasonable determination of the Lender,
provide the Lender, within thirty (30) days after a demand by the Lender, with
satisfactory evidence that the necessary funds are available to pay the cost of
removing, treating, and disposing of such Hazardous Materials or Hazardous
Materials Contamination and discharging any Lien which may be established as a
result thereof on any property owned or controlled by any of the Borrowers or
by any of the Subsidiaries or Affiliates of any of the Borrowers or for which
any of them is responsible; and
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(d) As part of the Obligations, defend, indemnify and hold
harmless the Lender and its agents, employees, trustees, successors and assigns
from any and all claims which may now or in the future (whether before or after
the termination of this Agreement) be asserted as a result of the presence of
any Hazardous Materials on any Apartment Property. Each of the Borrowers
acknowledges and agrees that this indemnification shall survive the termination
of this Agreement and the payment and performance of all of the other
Obligations.
6.1.12 DISCLOSURE OF SIGNIFICANT TRANSACTIONS. Each of the
Borrowers shall deliver to the Lender a written notice describing in detail (a)
each "Future Advance" made under the FNMA Debt, or any other increase in the
outstanding indebtedness evidenced thereby, which (i) causes the aggregate
indebtedness outstanding under the "Base Facility" (as defined in the FNMA Debt
Documents) to exceed $300,000,000, (ii) causes the aggregate indebtedness
outstanding under the "Revolving Facility" (as defined in the FNMA Debt
Documents) to exceed $75,000,000, or (iii) causes there to be outstanding under
or pursuant to the FNMA Debt Documents any other Indebtedness for Borrowed
Money other than fees and expenses provided for therein which are not material
in amount to the Borrowers, taken as a whole, and (b) each other transaction by
it or by any of its Subsidiaries or Affiliates involving the purchase, sale,
lease, or other acquisition or loss or casualty to or disposition of an
interest in Fixed or Capital Assets which exceeds Two Million Dollars
($2,000,000), said notices to be delivered to the Lender within thirty (30)
days of the occurrence of each such transaction.
6.1.13 MAINTENANCE OF THE COLLATERAL. Each of the Borrowers will
maintain, and will cause each of the Property Owners to maintain, the
Collateral in good order and repair (ordinary wear and tear excepted), and will
not permit anything to be done to the Collateral which may materially impair
the value thereof. In particular, and not in limitation thereof, the Borrowers
shall make or cause to be made all immediate improvements to each Apartment
Property required or recommended by the engineer in any of the inspection
reports obtained by the Lender in connection with the Credit Facility which are
necessary to correct health and/or safety violations expressed therein or to
maintain the structural integrity of the Apartment Property in question in a
manner satisfactory to the Lender in all respects and within a time frame
reasonably acceptable to the Lender and shall acquire all replacement items
designated in the foregoing inspection reports within the time periods allotted
by the engineer therein.
6.1.14 DEFENSE OF TITLE AND FURTHER ASSURANCES. At its expense,
each of the Borrowers will defend, and will cause each of the Property Owners
to defend, the title to the Collateral (and any part thereof), and will
immediately execute, acknowledge and deliver, and will cause each of the
Property Owners to execute, acknowledge and deliver, any financing statement,
deed of trust, mortgage, renewal, affidavit, supplement, deed, assignment,
continuation statement, security agreement, certificate or other document which
the Lender may require in order to perfect, preserve, maintain, continue,
protect and/or extend the Lien granted to the Lender under any of the Financing
Documents and the priority of that Lien. The Borrowers will from time to time,
and will cause each of the Property Owners to, do whatever the Lender may
reasonably require by way of obtaining, executing, delivering, and/or filing
financing statements, deeds of trust, mortgages, landlords' or mortgagees'
waivers, notices of assignment and other notices and amendments and renewals
thereof and the Borrowers will take, and will cause each of the Prop-
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erty Owners to take, any and all steps and to observe such formalities as the
Lender may require, in order to create and maintain a valid Lien upon, pledge
of, or paramount security interest in, the Collateral, subject to the Permitted
Liens. The Borrowers shall pay to the Lender on demand all taxes, costs and
expenses incurred by the Lender in connection with the preparation, execution,
recording and filing of any such document or instrument. Each of the Borrowers
agrees that a copy of a fully executed security agreement and/or financing
statement shall be sufficient to satisfy for all purposes the requirements of a
financing statement as set forth in Article 9 of the applicable Uniform
Commercial Code. In the event of any failure by any of the Borrowers to comply,
within ten (10) days, with any written request by the Lender therefor, each of
the Borrowers hereby irrevocably appoints the Lender as its attorney-in-fact,
with power of substitution, in the name of the Lender or in the name of the
Borrowers or otherwise, for the use and benefit of the Lender, but at the cost
and expense of the Borrowers and without notice to the Borrowers, to execute
and deliver any and all of the instruments and other documents and take any
action which the Lender may require pursuant the foregoing provisions of this
Section 6.1.14.
6.1.15 BUSINESS NAMES; LOCATIONS. Each of the Borrowers will
notify and cause each of the Property Owners to notify the Lender not less than
thirty (30) days prior to (a) any change in the name under which such Borrower
or the applicable Property Owner conducts its business, (b) any change of the
location of the chief executive office of any of the Borrowers or of the
applicable Property Owner, and (c) the opening of any new place of business or
the closing of any existing place of business, and any change in the location
of the places where the books and records pertaining to the Collateral, or any
part thereof, are kept.
6.1.16 PROTECTION OF COLLATERAL. Each of the Borrowers agrees
that the Lender may at any time following an Event of Default take such steps
as the Lender deems reasonably necessary to protect the Lender's interest in,
and to preserve the Collateral, including, the hiring of such security guards
or the placing of other security protection measures as the Lender deems
appropriate, and may employ and maintain at any of the premises of the
Borrowers or of any Property Owner a custodian who shall have full authority to
do all acts necessary to protect the Lender's interests in the Collateral. Each
of the Borrowers agrees to cooperate fully and to cause each of the Property
Owners to cooperate fully with the Lender's efforts to preserve the Collateral
and will take such actions to preserve the Collateral as the Lender may
reasonably direct. All of the Lender's expenses of preserving the Collateral
shall be part of the Enforcement Costs.
6.1.17 MAINTENANCE OF REIT STATUS. The Trust shall at all times
comply with all requirements of applicable Laws and regulations necessary to
maintain REIT Status and shall operate its business in compliance with the
terms and conditions of this Agreement and the other Financing Documents.
6.1.18 MAINTENANCE OF STOCK EXCHANGE LISTING. The Trust shall
cause its common shares of beneficial interest to be listed at all times on the
New York Stock Exchange or the American Stock Exchange. The Trust will forward
to the Lender copies of any and all notices from the Securities and Exchange
Commission related to any actual or potential suspension of such listing on
either such exchange.
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SECTION 6.2 NEGATIVE COVENANTS. So long as any of the Obligations
shall be outstanding hereunder, each of the Borrowers agrees with the Lender as
follows:
6.2.1 CONSOLIDATIONS, MERGERS, ETC. None of the Borrowers nor any
Subsidiary or Affiliate of any of the Borrowers shall, except as otherwise
expressly permitted pursuant to the terms hereof, (a) consolidate or merge with
or into any Person other than any of the Borrowers or one of the other
Subsidiaries or Affiliates of any of the Borrowers, (b) sell, lease, abandon or
otherwise transfer all or any material part of its assets to any Person, in one
or a series of related transactions, (c) terminate, or fail to maintain, its
existence or qualification, as applicable, in the State of Maryland, and any
other applicable jurisdiction where the business of any of the Borrowers or any
Subsidiary or Affiliate of any of the Borrowers, as applicable, requires such
qualification, or (d) terminate, or fail to maintain, its good standing and
qualification to transact business in all jurisdictions where the failure to
maintain its good standing or qualification to transact business could have a
material adverse effect on its financial condition or operations.
Notwithstanding the foregoing, (i) the sale or transfer of all of the interests
in, or any merger or consolidation involving, one or more of the Subsidiaries
or Affiliates of any of the Borrowers (whether now existing or hereafter
owned), other than any of the Property Owners, in order to effectuate a sale of
the real property owned by such Subsidiary or Affiliate shall not constitute a
violation of the foregoing prohibitions, so long as, immediately following each
such sale, transfer, merger or consolidation the Borrowers or their
Subsidiaries and Affiliates shall continue to maintain 100% ownership of all of
the Apartment Properties and at least thirty-one (31) of the thirty-six (36)
operating properties listed on Exhibit B attached hereto and made a part
hereof, and (ii) the sale or transfer of all of the interests in, or any merger
or consolidation involving, the Trust or the Operating Partnership shall not
constitute a violation of the foregoing prohibitions, so long as (1) the Trust
and the Operating Partnership are maintained as independent, wholly-owned
subsidiaries of the acquiring entity, (2) the acquiring entity, after giving
effect to such merger or consolidation, has a net worth, determined by the
Lender in accordance with generally accepted accounting principles,
consistently applied, at least equal to $500,000,000, or has a market
capitalization, as determined by the Lender, at least equal to $650,000,000,
(3) neither the Trust nor the Operating Partnership incurs, assumes or becomes
liable for the payment of any Indebtedness for Borrowed Money as a result of or
in connection with such transaction, except for such Indebtedness for Borrowed
Money expressly permitted by the terms of subsection 5.2(b) above, and (4) the
Trust and the Operating Partnership continue to maintain, either directly or
indirectly, 100% ownership of all of the Apartment Properties and at least
thirty-one (31) of the thirty-six operating properties listed on Exhibit B
attached hereto and made a part hereof.
6.2.2 LIMITATIONS ON LIENS. None of the Property Owners shall
create, incur, assume or suffer to exist any Lien upon any of its assets,
except for Permitted Liens.
6.2.3 PURCHASE OR REDEMPTION OF INTERESTS, DIVIDEND RESTRICTIONS.
None of the Borrowers shall declare any dividend (other than a dividend payable
in capital stock of the Trust) or partnership distribution or apply any of its
property or assets to the purchase, redemption or other retirement of, or set
apart any sum for the payment of any dividend or distribution on, or for the
purchase, redemption or other retirement of, or in respect of, any interest in
the
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Borrowers, or permit any Subsidiary or Affiliate to purchase or acquire any
interest in the Borrowers, or pay any fees or other compensation, or make loans
or advances to, or enter into any transactions with, any shareholder, partner,
subsidiary or affiliate of any of the Borrowers or any person or entity owned
or controlled by, controlling, or affiliated with, or related to any of the
Borrowers (other than sums paid, or transactions entered into, in the ordinary
course of business, on account of goods or services supplied on terms not more
favorable than would be realized by bona-fide, third party vendors or
suppliers) if (i) an Event of Default of the type described in Section 7.1.1
below then exists, or (ii) the Lender has delivered to the Borrowers (and not
withdrawn or rescinded in writing) written instructions not to take any of the
foregoing actions, which instructions the Lender may deliver to the Borrowers
at any time and from time to time following the occurrence, and during the
continuance, of any other Event of Default; provided, however, that nothing
herein contained shall prevent inter-company transfers between the Borrowers so
long as the Lender receives notice of the occurrence of the same on a weekly
basis or on a more frequent basis, if requested by the Lender.
6.2.4 ERISA COMPLIANCE. None of the Borrowers nor any Subsidiary
or Affiliate of any of the Borrowers shall: (a) engage in or permit any
"prohibited transaction" (as defined in ERISA); (b) cause any "accumulated
funding deficiency" as defined in ERISA and/or the Internal Revenue Code; (c)
terminate any pension plan in a manner which could result in the imposition of
a lien on any property of any of the Borrowers or any of the Subsidiaries or
Affiliates of any of the Borrowers pursuant to ERISA; (d) terminate or consent
to the termination of any Multiemployer Plan; or (e) incur a complete or
partial withdrawal with respect to any Multiemployer Plan, if the taking or
permitting to occur of any of the foregoing actions would have or cause a
material adverse effect on the business, properties or condition (financial or
otherwise) of any of the Borrowers, of any of the Property Owners or of the
Borrowers and their Subsidiaries and Affiliates taken as a whole.
6.2.5 PROHIBITION ON HAZARDOUS MATERIALS. None of the Borrowers
nor any Subsidiary or Affiliate of any of the Borrowers shall place,
manufacture or store or permit to be placed, manufactured or stored any
Hazardous Materials on any property owned or controlled by any of the Borrowers
or any of the Subsidiaries or Affiliates of any of the Borrowers or for which
any of them is responsible other than Hazardous Materials placed or stored on
such property in accordance with all applicable Laws in the ordinary course of
business.
6.2.6 METHOD OF ACCOUNTING; FISCAL YEAR. None of the Borrowers
nor any Subsidiary or Affiliate of any of the Borrowers shall (a) change the
method of accounting employed in the preparation of the financial statements
furnished prior to the date of this Agreement to the Lender, unless required to
conform to GAAP and on the condition that the Borrowers' accountants shall
furnish such information as the Lender may request to reconcile the changes
with the Borrowers' prior financial statements, or (b) change its fiscal year
from a year ending on December 31.
6.2.7 DISPOSITION OF COLLATERAL. None of the Borrowers nor any
Property Owner shall sell, assign, lease, transfer, convey, extend the time for
payment on, or otherwise dispose of all or any portion of the Collateral, other
than (a) in connection with a transaction which causes the repayment in full of
all Advances made by the Lender with respect to such portion of the
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Collateral, (b) the execution of tenant leases in the ordinary course of
business, and (c) as otherwise permitted by the terms of the applicable Deed of
Trust.
6.2.8 ALTERATIONS. None of the Borrowers, nor any of the Property
Owners, shall commit or permit any waste of any of the Apartment Properties,
and none of them shall without the prior written consent of the Lender make or
permit to be made any alterations or additions to any such property of a
material nature other than alterations or additions which will not materially
and adversely affect the value of any such property.
6.2.9 USE VIOLATIONS. None of the Borrowers, nor any Property
Owner shall use, maintain, operate or occupy, or allow the use, maintenance,
operation or occupancy of, any of its properties in any manner which (a)
violates any Law, (b) may reasonably be considered to be dangerous unless
safeguarded as required by Law, (c) constitutes a public or private nuisance,
(d) makes void, voidable or cancelable any insurance then in force with respect
thereto, or (e) makes void, voidable or cancelable any governmental permit.
None of the other Subsidiaries or Affiliates of any of the Borrowers shall use,
maintain, operate or occupy, or allow the use, maintenance, operation or
occupancy of, any of its properties in any manner which (a) violates any Law,
(b) may reasonably be considered to be dangerous unless safeguarded as required
by Law, (c) constitutes a public or private nuisance, (d) makes void, voidable
or cancelable any insurance then in force with respect thereto, or (e) makes
void, voidable or cancelable any governmental permit, if the effect of the same
would have or cause a material adverse effect on the business, properties or
condition (financial or otherwise) of the Borrowers and the Subsidiaries and
Affiliates of the Borrowers taken as a whole.
6.2.10 AMENDMENT OF FNMA DEBT DOCUMENTS. Without the prior
written consent of the Lender, none of the Borrowers nor any Subsidiary or
Affiliate of any of the Borrowers shall (a) enter into any amendment,
modification or alteration of any of the FNMA Debt Documents, or (b) cause,
create, incur, allow, acknowledge, consent to or permit to become effective any
action requiring the approval of any lender under the FNMA Debt Documents, if
any such action described in either of clauses (a) and (b) would have the
effect of (i) increasing the rate of interest payable thereunder, (ii)
accelerating the date for payment of any principal sum due thereunder, (iii)
modifying any term or provision of Article II, Article IV, Article VIII,
Sections 13.02(c), 13.07(c) or 13.08(a) or (b) of Article XIII, Article XVI,
Article XX (other than Sections 20.03(a) and (b)) or Article XXI of the FNMA
Master Credit Agreement, or any of the defined terms referred to in any of such
Articles or Sections, or (iv) impairing in any material respect the Borrowers'
ability to pay and perform the Obligations; provided, however, that the
Borrowers shall deliver to the Lender a copy of all such permitted amendments,
modifications or approvals promptly after the execution or issuance thereof.
For the purposes hereof, the waiver of any event of default under the FNMA Debt
Documents by the lender thereunder shall not constitute an amendment,
modification or alteration of the same. Without the prior written consent of
the Lender, none of the Borrowers nor any Subsidiary or Affiliate of any of the
Borrowers shall cause, consent to, allow or permit to become effective any
termination of the FNMA Debt or of any of the FNMA Debt Documents unless such
Indebtedness for Borrowed Money is replaced with a new credit facility the
terms and conditions of which (including
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without limitation, the principal amount thereof) are acceptable in all
respects to the Lender and its counsel.
ARTICLE VII
DEFAULT AND RIGHTS AND REMEDIES
SECTION 7.1 EVENTS OF DEFAULT. The occurrence of any one or more
of the following events shall constitute an "Event of Default" under the
provisions of this Agreement:
7.1.1 FAILURE TO PAY. The failure of any of the Borrowers or any
of the Property Owners to pay any of the Obligations within ten (10) days of
the date as and when due and payable in accordance with the provisions of this
Agreement, the Note and/or any of the other Financing Documents.
7.1.2 BREACH OF REPRESENTATIONS AND WARRANTIES. Any
representation or warranty made in this Agreement or in any report, statement,
schedule, certificate, opinion (including any opinion of counsel for the
Borrowers), financial statement or other document furnished in connection with
this Agreement, any of the other Financing Documents, or the Obligations, shall
prove to have been false or misleading when made (or, if applicable, when
reaffirmed) in any material respect.
7.1.3 FAILURE TO COMPLY WITH COVENANTS. Any covenant, condition
or agreement contained in this Agreement shall not be performed, observed or
complied with as required by the terms hereof, which failure shall continue for
more than thirty (30) days after written notice thereof shall have been sent by
the Lender to the Borrowers.
7.1.4 DEFAULT UNDER OTHER FINANCING DOCUMENTS OR OBLIGATIONS. A
default shall occur under any of the other Financing Documents or under any of
the other Obligations, and such default is not cured within any applicable
grace and/or cure period provided therefor.
7.1.5 RECEIVER; BANKRUPTCY. Any of the Borrowers or any of the
Subsidiaries or Affiliates of any of the Borrowers shall (a) apply for or
consent to the appointment of a receiver, trustee or liquidator of itself or
any of its property, (b) admit in writing its inability to pay its debts as
they mature, (c) make a general assignment for the benefit of creditors, (d) be
adjudicated a bankrupt or insolvent, (e) file a voluntary petition in
bankruptcy or a petition or an answer seeking or consenting to a reorganization
or an arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation
law or statute, or an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law, or take any action for
the purposes of effecting any of the foregoing, or (f) by any act indicate its
consent to, approval of or acquiescence in any such proceeding or the
appointment of any receiver of or trustee for any of its property, or suffer or
allow any such receivership, trusteeship or proceeding to continue undischarged
for a period of sixty (60) days, or (g) by any act indicate its consent to,
approval of or acquiescence in any
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order, judgment or decree by any court of competent jurisdiction or any
Governmental Authority enjoining or otherwise prohibiting the operation of a
material portion of the business of any of the Borrowers or of any of the
Subsidiaries or Affiliates of any of the Borrowers or the use or disposition of
a material portion of the assets of any of the Borrowers or of any of the
Subsidiaries or Affiliates of any of the Borrowers.
7.1.6 INVOLUNTARY BANKRUPTCY, ETC. (a) An order for relief shall
be entered in any involuntary case brought against any of the Borrowers or any
of the Subsidiaries or Affiliates of any of the Borrowers under the Bankruptcy
Code, or (b) any such case shall be commenced against any of the Borrowers or
any of the Subsidiaries or Affiliates of any of the Borrowers and shall not be
dismissed within sixty (60) days after the filing of the petition, or (c) an
order, judgment or decree under any other Law is entered by any court of
competent jurisdiction or by any other Governmental Authority on the
application of a Governmental Authority or of a Person other than any of the
Borrowers or any of the Subsidiaries or Affiliates of any of the Borrowers (i)
adjudicating any of the Borrowers or any of the Subsidiaries or Affiliates of
any of the Borrowers as bankrupt or insolvent, or (ii) appointing a receiver,
trustee or liquidator of any of the Borrowers or of any of the Subsidiaries or
Affiliates of any of the Borrowers, or of a material portion of any assets of
any of the Borrowers or of any of the Subsidiaries or Affiliates of any of the
Borrowers, or (iii) enjoining, prohibiting or otherwise limiting the operation
of a material portion of the business of any of the Borrowers or of any of the
Subsidiaries or Affiliates of any of the Borrowers or the use or disposition of
a material portion of the assets of any of the Borrowers or of any of the
Subsidiaries or Affiliates of any of the Borrowers, and such order, judgment or
decree continues unstayed and in effect for a period of thirty (30) days from
the date entered.
7.1.7 JUDGMENT. Unless adequately insured in the opinion of the
Lender, the entry of a final judgment for the payment of money involving more
than $250,000 against any of the Borrowers or any of the Property Owners or
involving more than $1,000,000 against any of the other Subsidiaries or
Affiliates of any of the Borrowers, and the failure by the Borrowers or any of
the Subsidiaries or Affiliates of any of the Borrowers to discharge the same,
or cause it to be discharged, within thirty (30) days from the date of the
order, decree or process under which or pursuant to which such judgment was
entered, or to secure a stay of execution pending appeal of such judgment.
7.1.8 EXECUTION; ATTACHMENT. Any execution or attachment shall be
levied against the Collateral, or any part thereof, and such execution or
attachment shall not be set aside, discharged or stayed within thirty (30) days
after the same shall have been levied.
7.1.9 DEFAULT UNDER OTHER BORROWINGS. Any of the Borrowers or any
Subsidiary or Affiliate of any of the Borrowers (a) shall default in the
payment of the FNMA Debt or in the payment of any future indebtedness which
repaid or refinanced all or any portion of the FNMA Debt, or any event or
condition which constitutes a default under or results in the acceleration of
the FNMA Debt or of any such future indebtedness shall occur and remain uncured
(and not waived) beyond any applicable notice, grace and/or cure period
provided therefor, or (b) shall default in the payment of any other
Indebtedness for Borrowed Money in excess of $500,000, or
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any event or condition which constitutes a default under any other Indebtedness
for Borrowed Money in excess of $500,000 shall occur and remain uncured beyond
any applicable grace and/or cure period provided therefor and the holder of
such Indebtedness for Borrowed Money shall accelerate the maturity of such
Indebtedness for Borrowed Money or exercise any other rights and remedies
available to such holder as a result of such default.
7.1.10 FAILURE OF MESSRS. LERNER AND SCHULWEIS TO MAINTAIN
INTERESTS. Without the prior express, written consent of the Lender, either
Alfred Lerner or Harvey Schulweis sells, assigns, transfers, encumbers or
otherwise conveys any of his interests in the Operating Partnership (or any
shares of beneficial interests in the Trust into which such interests may be
converted); excluding, however, (a) any conveyance that occurs by inheritance,
devise, or bequest or by operation of law upon the death of Harvey Schulweis or
Alfred Lerner; (b) any conveyance to immediate family members of Harvey
Schulweis or Alfred Lerner or to trusts established for the benefit of Harvey
Schulweis or Alfred Lerner and/or their respective immediate family members;
provided, that Harvey Schulweis or Alfred Lerner, as the case may be, gives the
Lender notice of such conveyance concurrently therewith; (c) a conversion of
interests in the Operating Partnership into shares of beneficial interest in
the Trust (but such shares shall be subject to the prohibitions set forth in
this Section); and (d) a conveyance in connection with a merger or
consolidation of the Trust or the Operating Partnership so long as (i) the
Trust and the Operating Partnership are maintained as independent, wholly-owned
subsidiaries of the acquiring entity, (ii) the acquiring entity, after giving
effect to such merger or consolidation, has a net worth, determined by the
Lender in accordance with generally accepted accounting principles,
consistently applied, at least equal to $500,000,000, or has a market
capitalization, as determined by the Lender, at least equal to $650,000,000,
(iii) neither the Trust nor the Operating Partnership incurs, assumes or
becomes liable for the payment of any Indebtedness for Borrowed Money as a
result of or in connection with such transaction, except for such Indebtedness
for Borrowed Money expressly permitted by the terms of subsection 5.2(b) above,
and (iv) the Trust and the Operating Partnership continue to maintain, either
directly or indirectly, 100% ownership of all of the Apartment Properties and
at least thirty-one (31) of the thirty-six (36) operating properties listed on
Exhibit B attached hereto and made a part hereof.
7.1.11 PROPERTY OWNERS. The failure of the Borrowers, at any time
during the term of the Credit Facility, to directly or indirectly own 100% of
the Property Owners.
7.1.12 CHANGE IN MANAGEMENT. A material change in the key
management personnel of the Trust, which is likely to have a material adverse
effect on the Trust, as determined by the Lender in its reasonable discretion.
SECTION 7.2 REMEDIES. Upon the occurrence of any Event of Default, the
Lender may at any time thereafter exercise any one or more of the following
rights, powers or remedies:
7.2.1 ACCELERATION. The Lender may declare the Obligations to be
immediately due and payable, notwithstanding anything contained in this
Agreement or in any of the other Financing Documents to the contrary, without
presentment, demand, protest, notice of protest or of dishonor, or other notice
of any kind, all of which all of the Borrowers hereby waive.
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7.2.2 FURTHER ADVANCES. The Lender may from time to time without
notice to any of the Borrowers or to any of the Property Owners suspend,
terminate or limit any further Advances, loans or other extensions of credit
under this Agreement and under any of the other Financing Documents.
7.2.3 UNIFORM COMMERCIAL CODE. The Lender shall have, with
respect to the Collateral, all of the rights and remedies of a secured party
under the Financing Documents and under the Uniform Commercial Code and other
applicable Laws. Upon demand by the Lender, the Borrowers and each of the
Property Owners shall assemble the Collateral and make it available to the
Lender, at a place designated by the Lender. The Lender or its agents may
without notice from time to time enter upon the premises of the Borrowers and
the Property Owners to take possession of the Collateral, to remove it, to
render it unusable, to process it or otherwise prepare it for sale, or to sell
or otherwise dispose of it. If any consent, approval, or authorization of any
state, municipal or other governmental department, agency or authority or of
any Person, having any interest therein, should be necessary to effectuate any
sale or other disposition of the Collateral, each of the Borrowers and each of
the Property Owners agrees to execute all such applications and other
instruments, and to take all other action, as may be required in connection
with securing any such consent, approval or authorization.
7.2.4 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL. In addition to
all other rights and remedies provided hereunder, under the other Financing
Documents or as shall exist at Law or in equity from time to time, the Lender
may (but shall be under no obligation to), without notice to any of the
Borrowers or to any of the Property Owners, and each of the Borrowers and each
of the Property Owners hereby irrevocably appoints the Lender as its
attorney-in-fact, with power of substitution, in the name of the Lender or in
the name of any of the Borrowers or any of the Property Owners or otherwise,
for the use and benefit of the Lender, but at the cost and expense of the
Borrowers and without notice to any of the Borrowers or to any of the Property
Owners, to:
(a) Compromise, extend or renew any of the Collateral or deal
with the same as it may deem advisable;
(b) Copy, transcribe, or remove from any place of business
of any of the Borrowers or any of the Property Owners all books, records,
ledger sheets, correspondence, invoices and documents, relating to or
evidencing any of the Collateral or without cost or expense to the Lender, make
such use of the Borrowers' place(s) of business as may be reasonably necessary
to administer, control and collect the Collateral;
(c) Demand, collect, receipt for and give renewals,
extensions, discharges and releases of any of the Collateral;
(d) Institute and prosecute legal and equitable proceedings
to enforce collection of, or realize upon, any of the Collateral;
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(e) Settle, renew, extend, compromise, compound, exchange or
adjust claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;
(f) Endorse or sign the name of any of the Borrowers or any
of the Property Owners upon any items of payment, certificates of title,
instruments, securities, stock powers, documents, documents of title, financing
statements, assignments, notices, or other writings relating to or part of the
Collateral;
(g) Notify the Post Office authorities to change the address
for the delivery of mail to any of the Borrowers or to any of the Property
Owners to such address or Post Office Box as the Lender may designate and
receive and open all mail addressed to the Borrowers and the Property Owners;
and
(h) Take any other action necessary or beneficial to realize
upon or dispose of the Collateral or to carry out the terms of this Agreement.
7.2.5 APPLICATION OF PROCEEDS. Any proceeds of sale or other
disposition of the Collateral will be applied by the Lender to the payment of
the Enforcement Costs, and any balance of such proceeds will be applied by the
Lender to the payment of the balance of the Obligations in such order and
manner of application as the Lender may from time to time in its sole and
absolute discretion determine. If the sale or other disposition of the
Collateral fails to fully satisfy the Obligations, the Borrowers shall remain
liable to the Lender for any deficiency.
7.2.6 PERFORMANCE BY LENDER. If any of the Borrowers or any of
the Property Owners shall fail to pay the Obligations or otherwise fail to
perform, observe or comply with any of the conditions, covenants, terms,
stipulations or agreements contained in this Agreement or any of the other
Financing Documents, the Lender without notice to or demand upon any of the
Borrowers or any of the Property Owners and without waiving or releasing any of
the Obligations or any Default or Event of Default, may (but shall be under no
obligation to) at any time thereafter make such payment or perform such act for
the account and at the expense of the Borrowers, and may enter upon the
premises of any of the Borrowers or any of the Property Owners for that purpose
and take all such action thereon as the Lender may consider necessary or
appropriate for such purpose and each of the Borrowers and each of the Property
Owners hereby irrevocably appoints the Lender as its attorney-in-fact to do so,
with power of substitution, in the name of the Lender or in the name of any of
the Borrowers or any of the Property Owners or otherwise, for the use and
benefit of the Lender, but at the cost and expense of the Borrowers and without
notice to any of the Borrowers or any of the Property Owners. All sums so paid
or advanced by the Lender, together with interest thereon from the date of
payment, advance or incurring until paid in full at the Post-Default Rate and
all costs and expenses, shall be deemed part of the Enforcement Costs, shall be
paid by the Borrowers to the Lender on demand, and shall constitute and become
a part of the Obligations.
7.2.7 OTHER REMEDIES. The Lender may from time to time proceed to
protect or enforce its rights by an action or actions at law or in equity or by
any other appropriate proceeding, whether for the specific performance of any
of the covenants contained in this
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<PAGE> 43
Agreement or in any of the other Financing Documents, or for an injunction
against the violation of any of the terms of this Agreement or any of the other
Financing Documents, or in aid of the exercise or execution of any right,
remedy or power granted in this Agreement, the other Financing Documents,
and/or applicable Laws. The Lender is authorized to offset and apply to all or
any part of the Obligations all moneys, credits and other property of any
nature whatsoever of any of the Borrowers or of any of the Property Owners now
or at any time hereafter in the possession of, in transit to or from, under the
control or custody of, or on deposit with, the Lender, excluding, however, any
sums (including items awaiting collection) now or hereafter on deposit in the
Restricted Accounts.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 NOTICES. All notices, requests and demands to or upon the
parties to this Agreement shall be in writing and shall be deemed to have been
given or made when delivered by hand on a Business Day, or two (2) days after
the date when deposited in the mail, postage prepaid by registered or certified
mail, return receipt requested, or when sent by overnight courier, on the
Business Day next following the day on which the notice is delivered to such
overnight courier, addressed as follows:
Borrowers: THE TOWN AND COUNTRY TRUST
100 South Charles Street
Baltimore, Maryland 21201
Attention: Michael H. Rosen
THE TC OPERATING LIMITED PARTNERSHIP
100 South Charles Street
Baltimore, Maryland 21201
Attention: Michael H. Rosen
THE TC PROPERTY COMPANY II
100 South Charles Street
Baltimore, Maryland 21201
Attention: Michael H. Rosen
With a copy to: THE TOWN AND COUNTRY TRUST
9 West 57th Street
50th Floor
New York, New York 10019
Attn: Harvey Schulweis
-43-
<PAGE> 44
and with a copy to: James H. Berick, Esquire
Berick, Pearlman &
Mills Co., L.P.A.
1350 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114
Lender: THE FIRST NATIONAL BANK
OF MARYLAND
P.O. Box 1596
Mail Code 101-747
25 South Charles Street
17th Floor
Baltimore, Maryland 21203
By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
SECTION 8.2 AMENDMENTS; WAIVERS. This Agreement and the other
Financing Documents may not be amended, modified, or changed in any respect
except by an agreement in writing signed by the Lender and the Borrowers. No
waiver of any provision of this Agreement or of any of the other Financing
Documents, nor consent to any departure by any of the Borrowers or any of the
Subsidiaries or Affiliates of any of the Borrowers therefrom, shall in any
event be effective unless the same shall be in writing. No course of dealing
between any of the Borrowers or any of the Property Owners and the Lender and
no act or failure to act from time to time on the part of the Lender shall
constitute a waiver, amendment or modification of any provision of this
Agreement or any of the other Financing Documents or any right or remedy under
this Agreement, under any of the other Financing Documents or under applicable
Laws. Without implying any limitation on the foregoing:
(a) Any waiver or consent shall be effective only in the
specific instance, for the terms and purpose for which given, subject to such
conditions as the Lender may specify in any such instrument.
(b) No waiver of any Default or Event of Default shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereto.
(c) No notice to or demand on any of the Borrowers or on any
of the Subsidiaries or Affiliates of any of the Borrowers in any case shall
entitle any of the Borrowers or any of the Subsidiaries or Affiliates of any of
the Borrowers to any other or further notice or demand in the same, similar or
other circumstance.
(d) No failure or delay by the Lender to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the
-44-
<PAGE> 45
other Financing Documents, or to exercise any right, power or remedy consequent
upon a breach thereof, shall constitute a waiver, amendment or modification of
any such term, condition, covenant or agreement or of any such breach or
preclude the Lender from exercising any such right, power or remedy at any time
or times.
(e) By accepting payment after the due date of any amount
payable under this Agreement or under any of the other Financing Documents, the
Lender shall not be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any of the
other Financing Documents, or to declare a default for failure to effect such
prompt payment of any such other amount.
SECTION 8.3 CUMULATIVE REMEDIES. The rights, powers and remedies
provided in this Agreement and in the other Financing Documents are cumulative,
may be exercised concurrently or separately, may be exercised from time to time
and in such order as the Lender shall determine and are in addition to, and not
exclusive of, rights, powers and remedies provided by existing or future
applicable Laws. In order to entitle the Lender to exercise any remedy reserved
to it in this Agreement, it shall not be necessary to give any notice, other
than such notice as may be expressly required in this Agreement. Without
limiting the generality of the foregoing, the Lender may:
(a) Proceed against any of the Borrowers or any of the
Property Owners with or without proceeding against any other Person who may be
liable (by endorsement, guaranty, indemnity or otherwise) for all or any part
of the Obligations;
(b) Proceed against any of the Borrowers or any of the
Property Owners with or without proceeding under any of the other Financing
Documents or against any of the Collateral or other collateral and security for
all or any part of the Obligations;
(c) Without reducing or impairing the obligation of any of
the Borrowers or any of the Property Owners and without notice, release or
compromise with any guarantor or other Person liable for all or any part of the
Obligations under the Financing Documents or otherwise;
(d) Without reducing or impairing the obligations of any of
the Borrowers or any of the Property Owners and without notice thereof: (i)
fail to perfect the Lien on any or all of the Collateral or release any or all
of the Collateral or accept substitute Collateral, (ii) approve the making of
advances under the Credit Facility pursuant to this Agreement, (iii) waive any
provision of this Agreement or the other Financing Documents, (iv) exercise or
fail to exercise rights of set-off or other rights, or (v) accept partial
payments or extend from time to time the maturity of all or any part of the
Obligations.
SECTION 8.4 SEVERABILITY. In case one or more provisions, or part
thereof, contained in this Agreement or in any of the other Financing Documents
shall be invalid, illegal or unenforceable in any respect under any Law, then
without need for any further agreement, notice or action:
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<PAGE> 46
(a) The validity, legality and enforceability of the
remaining provisions shall remain effective and binding on the parties thereto
and shall not be affected or impaired thereby;
(b) The obligation to be fulfilled shall be reduced to the
limit of such validity;
(c) If such provision or part thereof pertains to the
repayment of the Obligations, then, at the sole and absolute discretion of the
Lender, all of the Obligations shall become immediately due and payable; and
(d) If the affected provision or part thereof does not
pertain to repayment of the Obligations, but operates or would prospectively
operate to invalidate this Agreement in whole or in part, then such provision
or part thereof only shall be void, and the remainder of this Agreement shall
remain operative and in full force and effect.
SECTION 8.5 ASSIGNMENTS BY LENDER. The Lender may, without notice to,
or consent of, any of the Borrowers or any of the Property Owners, sell, assign
or transfer to or participate with any Person or Persons all or any part of the
Obligations, and each such Person or Persons shall have the right to enforce
the provisions of this Agreement and any of the other Financing Documents as
fully as the Lender, provided that the Lender shall continue to have the
unimpaired right to enforce the provisions of this Agreement and any of the
other Financing Documents as to so much of the Obligations that the Lender has
not sold, assigned or transferred. In connection with the foregoing, the Lender
shall have the right to disclose to any such actual or potential purchaser,
assignee, transferee or participant all financial records, information,
reports, financial statements and documents obtained in connection with this
Agreement and any of the other Financing Documents or otherwise.
Notwithstanding the foregoing, provided that no Event of Default shall have
occurred, which remains uncured (and not waived), the Lender agrees not to sell
or assign its interest in the Credit Facility and the Financing Documents or
enter into any participation with respect to the Credit Facility or the
Financing Documents involving more than 50% of the Lender's interest therein or
pursuant to which the Lender shall be removed as the "lead lender" or "agent"
under the Credit Facility, without obtaining the prior written approval of the
Borrowers with respect to the proposed transferee, assignee or participant
(which approval shall not be unreasonably withheld), unless such sale,
assignment or participation arises out of or results from any merger or
reorganization involving the Lender or is required to be effectuated by the
Lender in order to avoid the violation of any statutory or regulatory mandate
or guideline, including, without limitation, any legal lending limit.
SECTION 8.6 SUCCESSORS AND ASSIGNS. This Agreement and all other
Financing Documents shall be binding upon and inure to the benefit of the
Borrowers and the Lender and their respective successors and assigns, except
that none of the Borrowers shall have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lender.
SECTION 8.7 CONTINUING AGREEMENTS. All covenants, agreements,
representations and warranties contained herein, in any of the other Financing
Documents, or in any certificate
-46-
<PAGE> 47
delivered pursuant hereto or thereto shall survive the making by the Lender of
the Credit Facility and the execution and delivery of the Note, shall be
binding upon each of the Borrowers and each of the Subsidiaries and Affiliates
of the Borrowers regardless of how long before or after the date hereof any of
the Obligations were or are incurred, and shall continue in full force and
effect so long as any of the Obligations are outstanding and unpaid. From time
to time upon the Lender's request, and as a condition of the release of any one
or more of the Financing Documents, the Borrowers, the Property Owners and
other Persons obligated with respect to the Obligations shall provide the
Lender with such acknowledgments and agreements as the Lender may require to
the effect that there exists no defenses, rights of setoff or recoupment,
claims, counterclaims, actions or causes of action of any kind or nature
whatsoever against the Lender, its agents and others, or to the extent there
are, identifying them.
SECTION 8.8 ENFORCEMENT COSTS. Each of the Borrowers hereby covenants
and agrees to pay to the Lender on demand all Enforcement Costs, together with
interest thereon from the date incurred or advanced until paid in full at a per
annum rate of interest equal at all times to the Post-Default Rate. Enforcement
Costs shall be immediately due and payable at the time advanced or incurred,
whichever is earlier. Without implying any limitation on the foregoing, each of
the Borrowers agrees, as part of the Enforcement Costs, to pay upon demand any
and all stamp and other Taxes and fees payable or determined to be payable in
connection with the execution and delivery of this Agreement and the other
Financing Documents and to save the Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay any Taxes or fees referred to in this Section. The provisions
of this Section shall survive the execution and delivery of this Agreement,
the repayment of the other Obligations and shall survive the termination of
this Agreement.
SECTION 8.9 APPLICABLE LAW; JURISDICTION.
8.9.1 GOVERNING LAW. As a material inducement to the Lender to
enter into this Agreement, each of the Borrowers acknowledges and agrees that
the Financing Documents, including, this Agreement, shall be governed by the
Laws of the State, as if each of the Financing Documents and this Agreement had
each been executed, delivered, administered and performed solely within the
State even though for the convenience and at the request of the Borrowers, one
or more of the Financing Documents may be executed elsewhere. The Lender
acknowledges, however, that remedies under certain of the Financing Documents
which relate to property outside the State may be subject to the laws of the
state in which the property is located.
8.9.2 CONSENT TO JURISDICTION. Each of the Borrowers irrevocably
submits to the jurisdiction of any state or federal court sitting in the State
over any suit, action or proceeding arising out of or relating to this
Agreement or any of the other Financing Documents. Each of the Borrowers
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. Final judgment in any such suit, action or proceeding
brought in any such court shall be conclusive and binding upon each of the
Borrowers and may be enforced in any court in which any of the Borrowers is
subject to
-47-
<PAGE> 48
jurisdiction, by a suit upon such judgment, PROVIDED that service of process is
effected upon the Borrowers in one of the manners specified in this Section or
as otherwise permitted by applicable Laws.
8.9.3 APPOINTMENT OF AGENT. Each of the Borrowers hereby
irrevocably designates and appoints Michael H. Rosen, as the Borrowers'
authorized agent to receive on the Borrowers' behalf service of any and all
process that may be served in any suit, action or proceeding of the nature
referred to in this Section in any state or federal court sitting in the State.
If such agent shall cease so to act, each of the Borrowers shall irrevocably
designate and appoint without delay another such agent in the State
satisfactory to the Lender and shall promptly deliver to the Lender evidence in
writing of such other agent's acceptance of such appointment and its agreement
that such appointment shall be irrevocable.
8.9.4 SERVICE OF PROCESS. Each of the Borrowers hereby consents
to process being served in any suit, action or proceeding of the nature
referred to in this Section by (a) the mailing of a copy thereof by registered
or certified mail, postage prepaid, return receipt requested, to the Borrowers
at the address designated in or pursuant to Section 8.1 hereof, and (b) serving
a copy thereof upon the agent, if any, designated and appointed by the
Borrowers as the Borrowers' agent for service of process by or pursuant to this
Section. Each of the Borrowers irrevocably agrees that such service (a) shall
be deemed in every respect effective service of process upon the Borrowers in
any such suit, action or proceeding, and (b) shall, to the fullest extent
permitted by law, be taken and held to be valid personal service upon the
Borrowers. Nothing in this Section shall affect the right of the Lender to
serve process in any manner otherwise permitted by law or limit the right of
the Lender otherwise to bring proceedings against the Borrowers in the courts
of any jurisdiction or jurisdictions.
SECTION 8.10 DUPLICATE ORIGINALS AND COUNTERPARTS. This Agreement
may be executed in any number of duplicate originals or counterparts, each of
such duplicate originals or counterparts shall be deemed to be an original and
all taken together shall constitute but one and the same instrument.
SECTION 8.11 HEADINGS. The headings in this Agreement are
included herein for convenience only, shall not constitute a part of this
Agreement for any other purpose, and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.
SECTION 8.12 NO AGENCY. Nothing herein contained shall be
construed to constitute any of the Borrowers as the Lender's agent for any
purpose whatsoever or to permit any of the Borrowers to pledge any of the
Lender's credit. The Lender shall not be responsible nor liable for any
shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause
thereof. The Lender shall not, by anything herein or in any of the Financing
Documents or otherwise, assume any of the Borrowers' obligations under any
contract or agreement assigned to the Lender, and the Lender shall not be
responsible in any way for the performance by the Borrowers of any of the terms
and conditions thereof.
-48-
<PAGE> 49
SECTION 8.13 DATE OF PAYMENT. Should the principal of or interest
on the Note become due and payable on other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and in the case
of principal, interest shall be payable thereon at the rate per annum specified
in the Note during such extension.
SECTION 8.14 ENTIRE AGREEMENT. This Agreement is intended by the
Lender and the Borrowers to be a complete, exclusive and final expression of
the agreements contained herein. Neither the Lender nor any of the Borrowers
shall hereafter have any rights under any prior agreements pertaining to the
matters addressed by this Agreement but shall look solely to this Agreement for
definition and determination of all of their respective rights, liabilities and
responsibilities under this Agreement.
SECTION 8.15 WAIVER OF TRIAL BY JURY. EACH OF THE BORROWERS AND
THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH ANY OF THE BORROWERS AND THE LENDER MAY BE PARTIES, ARISING
OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE OTHER
FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF
TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS,
INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS
WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH OF THE BORROWERS
AND THE LENDER, AND EACH OF THE BORROWERS HEREBY REPRESENTS THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
EACH OF THE BORROWERS FURTHER REPRESENTS THAT IT HAS BEEN REPRESENTED IN THE
SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.
SECTION 8.16 LIABILITY OF THE LENDER. Each of the Borrowers
hereby agrees that the Lender shall not be chargeable for any negligence,
mistake, act or omission of any third-party accountant, examiner, agency or
attorney employed by the Lender in making examinations, investigations or
collections, or otherwise in perfecting, maintaining, protecting or realizing
upon any lien or security interest or any other interest in the Collateral or
other security for the Obligations. By inspecting the Collateral or any other
properties of any of the Borrowers or any of the Subsidiaries or Affiliates of
any of the Borrowers or by accepting or approving anything required to be
observed, performed or fulfilled by the Borrowers or to be given to the Lender
pursuant to this Agreement or any of the other Financing Documents, the Lender
shall not be deemed to have warranted or represented the condition,
sufficiency, legality, effectiveness or legal effect of the same, and such
acceptance or approval shall not constitute any warranty or representation with
respect thereto by the Lender.
-49-
<PAGE> 50
SECTION 8.17. TRUST LIABILITY. The Lender hereby acknowledges
that the Trust Declaration provides that no trustee, officer, shareholder,
employee or agent of the Trust shall be held to any personal liability, jointly
or severally, for any obligation of or claim against the Trust. All persons
dealing with the Trust in any way shall look only to the assets of the Trust
for the payment of any sum or the performance of any obligation.
SECTION 8.18. NO OTHER OBLIGORS. References in this Agreement,
including, without limitation, those contained in Article VI hereof, to
Subsidiaries and Affiliates of the Borrowers, other than Property Owners, shall
not be deemed to state or imply that any such Subsidiary or Affiliate is liable
for any of the Obligations or bound by any term or condition hereof or of any
of the other Financing Documents, or that any of the property of any such
Subsidiary or Affiliate constitutes a part of the Collateral hereunder.
IN WITNESS WHEREOF, each of the parties hereto have executed and
delivered this Agreement under their respective seals as of the day and year
first written above.
WITNESS OR ATTEST: THE TOWN AND COUNTRY TRUST
/s/ Eleanora Rotko By /s/ Harvey Schulweis(SEAL)
- ----------------------- ----------------------------------
Harvey Schulweis
President
WITNESS OR ATTEST: THE TC OPERATING LIMITED PARTNERSHIP
By: The Town and Country Trust
Managing General Partner
/s/ Eleanora Rotko By /s/ Harvey Schulweis (SEAL)
- ------------------------- -----------------------------
Harvey Schulweis
President
-50-
<PAGE> 51
WITNESS OR ATTEST: THE TC PROPERTY COMPANY II
By: The TC Operating Limited Partnership
Managing General Partner
By: The Town and Country Trust
Managing General Partner
/s/ Eleanora Rotko By /s/ Harvey Schulweis (SEAL)
- ------------------------- ---------------------------
Harvey Schulweis
President
WITNESS: THE FIRST NATIONAL BANK OF MARYLAND
/s/ Bonnie M. Kuney By /s/ Barbara L. Simmons (SEAL)
- ------------------------- ------------------------------------
Name: BARBARA L. SIMMONS
Title: VICE-PRESIDENT
-51-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,511
<SECURITIES> 0
<RECEIVABLES> 1,391
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,693
<PP&E> 610,207
<DEPRECIATION> 241,719
<TOTAL-ASSETS> 387,505
<CURRENT-LIABILITIES> 10,149
<BONDS> 335,750
0
0
<COMMON> 158
<OTHER-SE> 35,765
<TOTAL-LIABILITY-AND-EQUITY> 387,505
<SALES> 0
<TOTAL-REVENUES> 73,087
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 51,317
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,702
<INCOME-PRETAX> 5,068
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,373
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,373
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
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