<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1999
-------------
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
------------------------------------
to
------------------
Commission file number 1-12514
AMERICAN REAL ESTATE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 84-1246585
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
620 WEST GERMANTOWN PIKE, SUITE 200, PLYMOUTH MEETING, PENNSYLVANIA 19462
(Address of principal executive offices)
(610) 834-7950
(Registrant's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No ___
A total of 7,501,558 Common Shares of the Registrant's common equity were
outstanding as of August 13, 1999.
-1-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1999 3
(unaudited) and December 31, 1998
Condensed Consolidated Statements of Operations (unaudited) 4
for the three months and six months ended June 30, 1999
and 1998
Consolidated Statements of Cash Flows (unaudited) 5
for the six months ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 17
Condition and Results of Operations
PART II. OTHER INFORMATION
Items 1 through 6 23
SIGNATURES 24
</TABLE>
-2-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND UNIT DATA)
<TABLE>
<CAPTION>
ASSETS June 30, 1999 December 31, 1998
------ --------------------- ----------------------
(unaudited)
INVESTMENT IN REAL ESTATE:
<S> <C> <C>
Land and land improvements $ 96,231 $ 92,243
Buildings and improvements 465,243 440,680
Assets held for sale --- 8,239
Construction-in-progress 1,964 ---
Investment in direct financing lease 1,584 1,707
--------------- ---------------
565,022 542,869
Less- accumulated depreciation (13,298) (6,867)
---------------- ----------------
Total investment in real estate, net 551,724 536,002
CASH AND CASH EQUIVALENTS 1,791 3,247
RESTRICTED CASH AND CASH ESCROWS 3,628 2,100
ACCOUNTS RECEIVABLE, including straight-line rent receivables of 3,747 2,007
$1,833 and $1,282 in 1999 and 1998, respectively
DEFERRED FINANCING COSTS ,net of accumulated 6,853 6,154
amortization of $1,290 and $616 in 1999 and 1998,
respectively
DEFERRED LEASING COSTS, net of accumulated 2,162 1,614
amortization of $394 and $149 in 1999 and 1998,
respectively
INVESTMENT IN AMERICAN REAL ESTATE 4,329 5,207
MANAGEMENT INC., at equity
OTHER ASSETS 1,967 3,035
--------------- ---------------
Total assets $ 576,201 $ 559,366
--------------- ---------------
--------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable and revolving credit facility, $ 361,297 $ 346,105
including unamortized premium on assumed indebtedness of
$3,181 and $3,542 in 1999 and 1998, respectively.
Accounts payable 1,659 968
Dividends and distributions payable 4,581 3,713
Accrued interest payable 1,333 662
Accrued leasing commissions 733 895
Accrued expenses and other liabilities 1,392 1,782
Deferred rent revenue 2,096 1,534
Security deposits 592 566
--------------- ---------------
Total liabilities 373,683 356,225
MINORITY INTEREST, 7,033,039 and 6,988,542 units outstanding in
1999 and 1998, respectively 88,185 88,205
--------------- ---------------
CONVERTIBLE PREFFERRED UNITS, Series A; $.001 par value; 300,000
units outstanding; liquidation preference of $25 per unit 7,500 7,500
--------------- ---------------
SHAREHOLDERS' EQUITY:
Convertible preferred stock, Series A, $.001 par value; 1 1
800,000 shares authorized, issued, and outstanding;
liquidation preference of $25 per share
Common stock, $.001 par value; 65,000,000 authorized; 8 7
7,501,558 and 7,391,765 shares issued and outstanding,
respectively
Warrants 685 685
Additional paid-in capital 104,272 104,324
Cumulative net income 17,912 14,292
Cumulative dividends (16,045) (11,873)
---------------- ----------------
Total shareholders' equity 106,833 107,436
--------------- ---------------
Total liabilities and shareholders' equity $ 576,201 $ 559,366
--------------- ---------------
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------------------ ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE:
Rent $ 16,674 $ 7,027 $ 32,976 $ 12,290
Reimbursement revenue and other income 1,775 967 3,506 1,445
----------- ------------ ----------- -----------
Total revenue 18,449 7,994 36,482 13,735
----------- ------------ ----------- -----------
OPERATING EXPENSES:
Property operating expenses 3,579 1,423 7,581 2,365
General and administrative 998 71 1,611 231
Depreciation and amortization 3,587 1,333 6,879 2,265
Interest expense 6,701 2,918 13,148 4,833
----------- ------------ ----------- -----------
Total operating expenses 14,865 5,745 29,219 9,694
----------- ------------ ----------- -----------
Income before equity in losses from equity method investments,
gains on sales of assets, distributions to preferred
unitholders and income allocated to preferred
shareholders, and minority interest of unitholders in
Operating Partnership 3,584 2,249 7,263 4,041
Equity in losses from equity method investments (4) (299) (490) (461)
Gain on sales of assets -- 5,072 1,284 11,952
----------- ------------ ----------- -----------
Income before distributions to preferred unitholders and 3,580 7,022 8,057 15,532
income allocated to preferred shareholders, and minority
interest of unitholders in Operating Partnership
Distributions to preferred unitholders (168) --- (337) ---
----------- ------------ ----------- -----------
Income before minority interest of unitholders in Operating 3,412 7,022 7,720 15,532
Partnership and income allocated to preferred shareholders
Minority interest of unitholders in Operating Partnership (1,387) (3,403) (3,200) (7,020)
----------- ------------ ----------- -----------
NET INCOME 2,025 3,619 4,520 8,512
INCOME ALLOCATED TO PREFERRED SHAREHOLDERS (450) --- (900) ---
----------- ------------ ----------- -----------
INCOME ALLOCATED TO COMMON SHAREHOLDERS $ 1,575 $ 3,619 $ 3,620 $ 8,512
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
BASIC EARNINGS PER COMMON SHARE $ 0.21 $ 0.66 $ 0.49 $ 1.56
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
WEIGHTED AVERAGE COMMON SHARES - BASIC 7,472,560 5,492,817 7,432,909 5,459,153
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
DILUTED EARNINGS PER COMMON SHARE $ 0.20 $ 0.66 $ 0.47 $ 1.51
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
WEIGHTED AVERAGE COMMON SHARES - DILUTED 14,672,736 10,707,944 14,588,622 10,294,244
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------------
1999 1998
----------------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income allocated to common shareholders $ 3,620 $ 8,512
Adjustments to reconcile net income allocated to common
shareholders to net cash provided by operating activities-
Depreciation and amortization 7,553 2,411
Amortization of debt premiums (361) ---
Gains on sales of assets (1,284) (11,952)
Equity in losses from equity
method investments 490 461
Minority interest allocation 3,200 7,020
Preferred shareholders and unitholders allocations 1,237 ---
Decrease in investment in direct financing lease 123 106
Increase in straight-line rent receivable (551) (422)
Cash provided by (used in) operating activities --
Restricted cash (1,528) 334
Accounts receivable (1,189) (851)
Other assets 1,068 (1,079)
Accounts payable, accrued expenses, and
other liabilities 301 289
Accrued interest payable 671 (305)
Deferred rent revenue 562 518
Accrued leasing commissions (162) (83)
Security deposits 26 (40)
----------------- ---------------
Net cash provided by operating activities 13,776 4,919
----------------- --------------
INVESTING ACTIVITIES:
Properties and real estate investments acquired (28,817) (105,733)
Payments from (advances to) American Real Estate Management Inc. 388 (922)
Capital expenditures (1,176) (316)
Payment of leasing commissions (849) (77)
Decrease in cash escrows from deferred exchanges --- 3,764
Proceeds from sales of assets, net 9,538 24,956
----------------- --------------
Net cash used in investing activities (20,916) (78,328)
------------------ ---------------
</TABLE>
(Continued)
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
(CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------------
1999 1998
----------------- -----------
FINANCING ACTIVITIES:
<S> <C> <C>
Issuance of common stock for stock options exercised 22 385
Dividends paid on Common Stock (3,918) (2,410)
Dividends and distributions paid on Convertible Preferred
Stock and Convertible Preferred OP Units (993) ---
Distributions paid on OP Units (3,605) (2,049)
Proceeds from mortgage notes payable 2,350 60,322
Payment of deferred financing costs (1,373) (1,949)
Net proceeds from Credit Facility 14,669 56,230
Repayment of mortgage notes (1,468) (40,938)
--------------- ---------------
Net cash provided by financing activities 5,684 69,591
-------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,456) (3,818)
CASH AND CASH EQUIVALENTS, beginning of period 3,247 17,672
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 1,791 $ 13,854
--------------- ---------------
--------------- ---------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 12,163 $ 4,992
--------------- ---------------
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-6-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
1. ORGANIZATION AND OPERATIONS:
American Real Estate Investment Corporation (the "Company") is a
self-administered and self-managed equity real estate investment trust ("REIT")
which was organized in the state of Maryland in 1994. The Company was previously
engaged in the ownership and operation of multifamily residential properties
located in certain markets within the Southwestern United States. In connection
with the transactions that were consummated on December 12, 1997 (the
"Reorganization"), the Company modified its strategy to focus on the acquisition
of industrial and office properties located in the mid-Atlantic and Eastern
United States. In June 1998, the Company sold its last remaining multifamily
residential property, American Quadrangles Village Apartments (Note 3).
As of August 11, 1999, the Company owns 71 industrial and 34 office
properties aggregating 10.6 million square feet and 2.3 million square feet,
respectively, and an investment in a direct financing lease (the "Properties").
The Properties are located in Eastern Pennsylvania, New York State, Northern New
Jersey, Ohio, Indianapolis, Indiana and Greenville and Spartanburg, South
Carolina and contain an aggregate of approximately 13.0 million square feet
which have an overall occupancy of 98.6%. The Company conducts all of its
service operations, including leasing, property management and other services
through American Real Estate Management Inc. (the "Management Company") an
equity investee of American Real Estate Investment, L.P. (the "Operating
Partnership"), which was acquired in the Reorganization.
2. GENERAL:
BASIS OF PRESENTATION
The financial statements have been prepared by the Company without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Accordingly, these financial statements should be read in
conjunction with the Company's consolidated financial statements and footnotes
thereto included in the Annual Report on Form 10-K for the year ended December
31, 1998. In the opinion of management, all adjustments, consisting solely of
normal recurring adjustments, necessary to fairly present the financial position
of the Company as of June 30, 1999 and the results of its operations for the
three months and six months ended June 30, 1999 and 1998 and its cash flows for
the six months ended June 30, 1999 and 1998 have been included. The results of
operations for such interim periods are not necessarily indicative of the
results for a full year.
-7-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
PRINCIPLES OF CONSOLIDATION
The Company is the sole general partner of the Operating Partnership
with an ownership interest of approximately 53% at June 30, 1999. The Company is
also the sole stockholder of several other subsidiary entities. The accompanying
consolidated financial statements include the account balances of the Company,
the Operating Partnership and the Company's wholly owned subsidiaries and their
operations for the six month periods ended June 30, 1999 and 1998 on a
consolidated basis. All significant intercompany accounts and transactions have
been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates.
EQUITY METHOD INVESTMENTS
The equity method of accounting is used to account for the Company's
non-controlling interest in 100% of the non-voting preferred stock of the
Management Company and the Company's 50% non-controlling interest in a joint
venture to develop 457 acres of land in Indianapolis, Indiana. At June 30, 1999,
the Company has an investment of approximately $617,000 in this joint venture
which is included in other assets in the accompanying financial statements.
IMPACT OF ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
Statement of Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133") is effective for
fiscal years beginning after June 15, 2000. SFAS No. 133 expands the definition
of derivatives and requires every derivative to be recorded on the balance sheet
as either an asset or liability measured at its fair value. It requires that
companies must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 133 requires that changes
in the derivatives fair value be recognized in the applicable financial
reporting period in earnings unless specific hedge criteria are met. At June 30,
1999, the Company does not have any investments in derivative products, as a
result, the impact of adopting SFAS No. 133, is not determinable. The Company is
planning to adopt SFAS No. 133 beginning January 1, 2001.
EARNINGS PER SHARE
The Company reports Earnings Per Share ("EPS") Statement of Financial
Accounting Standard No. 128, "Earnings per Share" ("SFAS No. 128"), which
established simplified standards for computing and presenting EPS and supercedes
the standards in APB Opinion No.15, making them more comparable to international
EPS standards. It requires the dual presentation of basic and diluted EPS on the
income statement and requires a reconciliation of the numerator and denominator
of basic EPS to diluted EPS.
-8-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations for the three and six month periods ended
June 30 (dollars in thousands except for share and per share information):
<TABLE>
<CAPTION>
1999 1998
------------------------------- --------------------------------
BASIC DILUTED BASIC DILUTED
<S> <C> <C> <C> <C>
FOR THE THREE MONTH PERIOD ENDED JUNE 30,
Net income $ 1,575 $ 1,575 $ 3,619 $ 3,619
Add: Minority interest allocation --- 1,387 --- 3,403
------------- ------------- ------------ -------------
$ 1,575 $ 2,962 $ 3,619 $ 7,022
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
Weighted average number of shares outstanding 7,472,560 7,472,560 5,492,817 5,492,817
Stock equivalents (1) (2):
Options and warrants --- 182,289 --- 301,057
Convertible OP Units --- 7,017,887 --- 4,914,070
------------- ------------- ------------ -------------
7,472,560 14,672,736 5,492,817 10,707,944
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
Earnings Per Share $ 0.21 $ 0.20 $ 0.66 $ 0.66
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999 1998
- ---------------------------------------
------------------------------- --------------------------------
Net income $ 3,620 $ 3,620 $ 8,512 $ 8,512
Add: Minority interest allocation --- 3,200 --- 7,020
------------- ------------- ------------ -------------
$ 3,620 $ 6,820 $ 8,512 $ 15,532
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
Weighted average number of shares outstanding 7,432,909 7,432,909 5,459,153 5,459,153
Stock equivalents (1)(2):
Options and Warrants --- 152,418 --- 284,269
Convertible OP Units --- 7,003,295 --- 4,550,822
------------- ------------- ------------ -------------
7,432,909 14,588,622 5,459,153 10,294,244
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
Earnings per Share $ 0.49 $ 0.47 $ 1.56 $ 1.51
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
</TABLE>
(1) Excludes Convertible Preferred Stock and Convertible Preferred OP Units
as these instruments were anti-dilutive at June 30, 1999.
(2) Computed in accordance with the treasury stock method.
RECLASSIFICATIONS
Certain amounts in the June 30, 1998 financial statements have been reclassified
in order to conform with the June 30, 1999 presentation.
-9-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
3. ACQUISITIONS AND DISPOSITIONS OF INVESTMENTS IN REAL ESTATE
1999 TRANSACTIONS
During the six month period ended June 30, 1999 the Company consummated
the following transactions:
- - In May 1999, the Company acquired a 39,252 square foot warehouse/office
facility in Indianapolis, Indiana for $3.6 million. The purchase was funded
by the proceeds of a $2.3 million mortgage note, $779,000 in OP Units at
$17.50 and cash of approximately $500,000. The Company had agreed to
acquire this building as a result of the acquisition with Browning
Investments which was closed in December 1998.
- - In April 1999, the Company acquired a portfolio of five warehouse and
distribution facilitites in Freemont, Ohio which aggregated approximately
515,000 square feet for approximately $12.7 million. This acquisition was
funded by the Credit Facility.
- - In February, 1999 the Company acquired 7.4 acres of land in Allentown,
Pennsylvania for $1.6 million. This land will be utilized to construct an
80,000 square foot office building of which 66,000 square feet will be
leased to Aetna US Healthcare.
- - On March 26, 1999 the Company consummated the sale of Urban Farms Shopping
Center located in Franklin Lakes, New Jersey for approximately $10.0
million. This acquisition was funded by the Credit Facility. This sale
resulted in a gain of approximately $1.3 million. The net proceeds of this
transaction were reinvested in the acquisition described below.
- - On March 26, 1999, the Company acquired a 303,000 square foot industrial
building in Duncan, South Carolina for approximately $9.5 million. This
building was constructed in 1998 and 100% leased to BMG Music, a subsidiary
of Bertelsmann AG, through August 2003. This purchase was funded through
the Company's Credit Facility and the net proceeds from the sale of Urban
Farms Shopping Center.
-10-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
1998 TRANSACTIONS
- During 1998, the Company acquired 78 properties (24 office
properties and 54 industrial properties) which contained an
aggregate of approximately 9.9 million square feet (1.5
million square feet of office and 8.4 million square feet of
industrial) for an aggregate purchase price of approximately
$418 million. Consideration for these acquisitions consisted
of cash of $300 million, $49 million of debt assumed
(including debt premiums of $3.8 million), approximately $51
million in units of limited partnership interest ("OP Units")
in the Operating Partnership, issued at prices ranging from
$16.50 to $17.50 per unit,$7.5 million in Convertible
Preferred OP Units and the issuance of $11.0 million of Common
Stock. The 300,000 Convertible Preferred OP Units issued are
convertible into Common Stock at $16.50 and require a
quarterly guaranteed payment at the annual rate of 9%. These
Convertible Preferred OP Units are redeemable by the Company
at par at any time.
- The Company sold the two remaining multi-family properties
(Americana Lakewood Apartments and Quadrangles Village
Apartments) in January and June, 1998, respectively, which
generated net proceeds of approximately $41.0 million and
gains of $11.9 million. The net proceeds from these asset
sales were reinvested in industrial and office acquisitions in
1998.
PRO FORMA OPERATING RESULTS
Assuming the completion of acquisitions and dispositions which occurred in 1999,
including the acquisition of One Park Place (Note 7), and in fiscal year 1998,
and the completion of the private placement offerings in 1998, as of January 1,
1998, pro forma operating results are presented as follows:
<TABLE>
<CAPTION>
(In 000's)
------------------------------------------
For Six Months For Year Ended
Ended June 30, December 31,
1999 1998
------------------ --------------------
<S> <C> <C>
Total revenue $39,463 $78,829
Operating income (1) 5,997 13,298
Minority interest 2,902 6,435
Net income allocated to common shareholders $ 3,095 $ 6,863
------------------ --------------------
------------------ --------------------
Earnings per share
Basic $.42 $.92
----- -----
----- -----
Diluted $.41 $.90
----- -----
----- -----
</TABLE>
(1) Net of $7,299 and $13,737 in depreciation expense for the six-month
period ended June 30, 1999 and the year ended December 31, 1998,
respectively.
-11-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
The pro forma operating results combine the Company's historical operating
results with the incremental rental income and operating expenses of the
properties acquired in 1999 and 1998, including adjustments for depreciation,
(based upon the acquisition price associated with the property acquisitions),
and interest costs assuming the borrowings to finance the property acquisitions
had occurred at the beginning of the period.
These pro forma amounts are not necessarily indicative of what the actual
results of the Company would have been assuming the above property acquisitions
and dispositions and other transactions had been consummated on January 1, 1998,
nor do they purport to represent the future results of the Company.
4. INDEBTEDNESS
REVOLVING CREDIT FACILITY
On April 30, 1998 the Company obtained a three year $150 million
senior secured revolving credit facility ("Credit Facility"). At June 30,
1999, the Company had $138.5 million outstanding related to the Credit
Facility. The Credit Facility is recourse to the Company and the Operating
Partnership and is secured by cross-collateralized and cross-defaulted first
mortgage loans on 57 properties. Borrowings under the Credit Facility enable
the Company to fund acquisitions and development of real estate, as well as
provide working capital and funds for capital improvements at a variable rate
equal to a Eurodollar rate plus 1.625% (6.59% at June 30, 1999) or the prime
rate, at the Company's option. In addition, a fee of .25% per annum on the
unused amount of the Credit Facility is payable quarterly. The weighted
average balance outstanding and weighted average interest rate for the six
months ended June 30, 1999 and 1998 for borrowings under the Credit Facility
were $131,380,000 and $33,778,000 and 6.6% and 7.26%, respectively. The
Credit Facility requires the Company to meet certain financial covenants on a
quarterly, annual and ongoing basis. The Company is in compliance with these
debt covenants at June 30, 1999.
On June 30, 1999, the terms of the Credit Facility were amended and restated. As
a result, the maturity of the Credit Facility was extended to April 29, 2002 and
several financial covenants were modified. The interest rate was modified to a
sliding scale based on the Company's leverage. The scale ranges from LIBOR
+1.625% to LIBOR +2.25%. Based on the Company's leverage the current rate is
LIBOR +2.00%. The Company is also able to elect to increase the amount available
under the Credit Facility to $250 million.
MORTGAGE NOTES
Mortgages notes of $219.6 million encumbered 46 of the properties as of June 30
1999. At June 30, 1999, interest rates on the mortgage loans ranged from fixed
rates of 7.03% to 9.75%. Mortgage notes had weighted average interest rates of
7.74% and 7.75% at June 30, 1999 and 1998, respectively. The maturities for
these notes range from September 2000 through October 2022. The weighted average
maturity was 7.6 years at June 30, 1999.
-12-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
5. SEGMENTS
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information," in 1998.
The Company considers its reportable segments to be office, industrial,
multifamily and other. At June 30, 1999, the other properties segment consists
of an investment in a direct financing lease and Urban Farms Shopping Center
which was sold in March 1999. Summarized financial information concerning the
Company's reportable segments is shown in the following table as of the three
and six months ended June 30, 1999 and 1998, unless otherwise noted.
-13-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
<TABLE>
<CAPTION>
(IN 000'S)
---------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------------------------------------------------------
BUSINESS SEGMENTS 1999 1998 1999 1998
- ----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Industrial properties $ 10,011 $ 3,935 $ 19,399 $ 6,482
Office properties 8,273 2,818 16,489 4,479
Multifamily properties --- 791 --- 1,784
Other properties 90 415 487 835
Other (1) 75 35 107 155
--------------- ---------------- --------------- ---------------
$ 18,449 $ 7,994 $ 36,482 $ 13,735
--------------- ---------------- --------------- ---------------
--------------- ---------------- --------------- ---------------
PROPERTY OPERATING INCOME
Industrial properties $ 6,704 $ 2,687 $ 12,892 $ 4,430
Office properties 4,419 1,781 8,681 2,864
Multifamily properties --- 468 --- 1,141
Other properties 85 267 342 525
--------------- ---------------- --------------- ---------------
$ 11,208 $ 5,203 $ 21,915 $ 8,960
--------------- ---------------- --------------- ---------------
--------------- ---------------- --------------- ---------------
CAPITAL EXPENDITURES
Industrial properties $ 165 $ 2 $ 316 $ 2
Office properties 495 92 860 274
Multifamily properties --- --- --- 40
Other properties --- --- --- ---
--------------- ---------------- --------------- ---------------
$ 660 $ 94 $ 1,176 $ 316
--------------- ---------------- --------------- ---------------
--------------- ---------------- --------------- ---------------
DEPRECIATION AND AMORTIZATION EXPENSE
Industrial properties $ 2,093 $ 793 $ 4,028 $ 1,347
Office properties 1,494 494 2,851 826
Multifamily properties --- --- --- ---
Other properties --- 46 --- 92
--------------- ---------------- --------------- ---------------
$ 3,587 $ 1,333 $ 6,879 $ 2,265
--------------- ---------------- --------------- ---------------
--------------- ---------------- --------------- ---------------
INVESTMENT IN REAL ESTATE, At Cost (2)
Industrial properties $ 338,831 $ 311,273
Office properties 224,607 221,650
Other properties 1,584 9,946
--------------- ---------------
$ 565,022 $ 542,869
--------------- ---------------
--------------- ---------------
</TABLE>
-14-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
The following is a reconciliation of segment property operating income
as shown above to the accompanying consolidated statement of operations for each
of the three and six month periods ended June 30:
<TABLE>
<CAPTION>
(IN 000'S)
-------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------ ------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Segment property operating income as shown above $ 11,208 $ 5,203 $ 21,915 $ 8,960
General and administrative expense (998) (71) (1,611) (231)
Interest expense (6,701) (2,918) (13,148) (4,843)
Other income (1) 75 35 107 155
-------------- -------------- ------------- -------------
Income before equity in losses from equity
method investments, gains on sales of assets,
distributions to preferred unitholders and
income allocated to preferred shareholders,
and minority interest of unitholders in
Operating Partnership
$ 3,584 $ 2,249 $ 7,263 $ 4,041
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
</TABLE>
(1) Amount consists of interest income not allocated to a specific business
segment.
(2) Amounts for 1998 are as of December 31, 1998.
6. DIVIDENDS
On January 29, 1999, the Company paid a dividend of $.265 per share for
the fourth quarter of 1998 which was declared in December 1998 and payable to
shareholders of record on December 31, 1998.
On March 5, 1999, the Company declared a dividend of $.265 per share
for the first quarter of 1999 which was paid on April 21, 1999 to shareholders
of record on March 31, 1999.
On June 4, 1999, the Company declared a dividend of $.295 per share for
the second quarter of 1999 which was paid on July 21, 1999 to shareholders of
record on June 30, 1999.
The Company and the Operating Partnership paid distributions to holders
of Convertible Preferred Stock and Convertible Preferred OP Units which are each
entitled to a 9.0% preferred return. Distributions accrued to holders of
Convertible Preferred Stock and Convertible Preferred OP Units were
approximately $450 and $169, and $900 and $338, respectively, during the three
and six months ended June 30, 1999. In July 1999, the Company paid a
distribution to the holders of the Convertible Preferred Stock of $450.
7. SUBSEQUENT EVENTS
In July 1999, the Company acquired One Park Place, a 290,278 square foot office
building in Syracuse, New York, for approximately $22.5 million. The Company
issued $11.3 million of
-15-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
Convertible Preferred OP Units, assumed $10.4 million of existing debt and paid
the remaining consideration in cash. The Convertible Preferred OP Units have a
conversion price of $16.50 and are entitled to a 9% preferred return. This
acquisition was the Company's final obligation related to a portfolio
acquisition which closed in August 1998.
On August 6, 1999, the Company signed a definitive agreement to
acquire certain entities owning real property from Reckson Morris Industrial
Trust, Reckson Operating Partnership, L.P., (both are affiliates of Reckson
Associates Realty Corporation), and Robert Morris, Joseph Morris and certain
other related entities pursuant to a Contribution and Exchange Agreement (the
"Contribution Agreement"). Pursuant to the Contribution Agreement, entities
owning 28 industrial facilities located in New Jersey, which aggregate
approximately 6.1 million square feet, will be contributed to the Company in
exchange for approximately $284 million of preferred and common stock of the
Company, preferred units of the Operating Partnership, cash and the
assumption of approximately $16.5 of existing mortgage debt. The transaction
also includes the purchase of 111 acres of land as well as definitive options
for approximately 250 acres of land which in aggregate will support
approximately 4.5 million square feet of future development. The cash
consideration will be funded by a $98 million mortgage loan from an
institutional lender with a six year term and a fixed rate of 7.45%, and
other equity to be raised by the Company. The transaction is scheduled to
close in three stages, subject to the satisfaction of certain customary
closing conditions, with the first stage projected to close in September
1999 which will include 22 buildings representing approximately 3.9 million
square feet. The second and third stages, each comprised of three buildings
containing approximately 1.1 million square feet, are scheduled to close by
April 30, 2000.
-16-
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains 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 words "believe", "expect", "anticipate", "intend",
"estimate" and other expressions which are predictions of or indicate future
events and trends and which do not relate to historical matters identify
forward-looking statements. The Company's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference include but are not limited to the
following: real estate investment considerations, such as the effect of
economic and other conditions in the market areas in which the Company
conducts business on cash flows and values; the need to renew leases or relet
space upon the expiration of current leases, and the ability of the
Properties to generate revenues sufficient to meet debt service payments and
other operating expenses; and risks associated with borrowings, such as the
possibility that the Company will not have sufficient funds available to make
principal payments on outstanding debt, outstanding debt may be refinanced at
higher interest rates or otherwise on terms less favorable to the Company and
interest rates under the Credit Facility may increase.
The following discussion compares the operations and activities of the
Company for the three and six month periods ended June 30, 1999 and 1998 and
should be read in conjunction with the accompanying financial statements and
notes thereto.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE AND SIX MONTHS ENDED JUNE 30,1999 AND 1998
Net income for the three and six month periods ended June 30,1999 and 1998
was $1.6 million and $3.6 million as compared with net income of $3.6 million
and $8.5 million for the same periods ended June 30, 1998. These decreases in
net income were primarily the result of $5.1 million and $6.9 million in
gains from the sales of assets in 1998, as compared to the same period in
1998. These gains from asset sales in 1998 were offset by increases in net
operating income in 1999 as a result of property acquisitions. At June 30,
1998, the Company owned 49 properties aggregating 5.7 million square feet. At
June 30, 1999, the Company owned 105 properties aggregating 12.7 square feet.
Net income for the three and six months ended June 30, 1999, excluding the
impact of the asset sales in 1998, would have been $1.6 million and $2.9
million, respectively, as compared to $1.0 million and $1.9 million for the
same periods in 1998, respectively.
Revenues for the three and six month periods ended June 30, 1999 increased to
$18.4 million and $36.5 million as compared with $7.9 million and $13.7 million
for the same periods in 1998, respectively, as a result of property
acquisitions.
-17-
<PAGE>
Operating expenses increased by approximately $9.1 million and $19.5 million for
the three and six month periods ended June 30, 1999 over the same periods in
1998. This overall increase is a result of property acquisitions and is
primarily the result of increases in depreciation and interest expense
associated with the increase in the Company's net investment in real estate and
related mortgage debt from $265.2 million and $162.1 million at June 30, 1998,
respectively, to $551.7 million and $361.3 million respectively, at June 30,
1999. General and administrative expenses increased for the three and six month
periods ended June 30, 1999 in comparison to the same periods last year as a
result of: increases in expense for certain Company expenses which were
previously paid by the Management Company, costs related to the amortization of
restricted stock awards granted in December 1998 and other increases in payroll
costs which resulted from the growth of the Company.
Equity in losses from equity method investments decreased by $295 in the three
months ended June 30, 1999 as compared to the same period in 1998 as a result of
a reduction in operating losses incurred by the Management Company. This
reduction in Management Company operating losses is a result of the allocation
of certain payroll and other costs in 1999 to the operating partnership. These
costs were incurred in 1998 by the Management Company.
Property level operating income for the three and six month periods ended June
30, 1999 and 1998 for the Properties owned since January 1, 1998 (the "Same
Store Properties") increased to approximately $2.9 million and $5.8 million,
respectively, from $2.7 million and $5.5 million in the same periods of 1998.
These increases are primarily due to increases in rental rates and increases in
occupancy in the Same Store Properties. Operating expenses for these properties
in the three month period ended June 30, 1998 decreased as a result of focused
cost management and cost reductions in repair and maintenance expenses.
Operating expenses increased less than 1% for the six month period ended June
30, 1999, as the reductions in repairs and maintenance expenses in the second
quarter was offset increased operating expenses in the first quarter as a result
of higher snow removal costs in 1999. The Same Store Properties consist of 20
properties which aggregate approximately 1.9 million square feet. Same Store
Properties represent approximately 20% of property net operating income as of
June 30, 1999.
Set forth below is a schedule comparing the property level operating income for
the Same Store Properties for the three and six month periods ended June 30,
1999 and 1998.
<TABLE>
<CAPTION>
(IN 000'S)
-----------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------- -----------------------------------------
1999 1998 % CHANGE 1999 1998 % CHANGE
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C>
Revenue
Rental revenue $ 3,151 $ 2,986 5.53 % $ 6,241 $ 5,919 5.44 %
Tenant reimbursement and other 353 367 (3.81)% 688 723 (4.84)%
----------- ------------ ------------ ----------- ----------- -----------
Total revenue $ 3,504 $ 3,353 4.50 % $ 6,929 $ 6,642 4.32 %
----------- ------------ ------------ ----------- ----------- -----------
----------- ------------ ------------ ----------- ----------- -----------
Operating Expenses
Property operating expenses $ 358 $ 402 (10.95)% $ 731 $ 738 (.95)%
Real estate taxes 200 193 3.63 % 405 389 4.11 %
----------- ------------ ------------ ----------- ----------- -----------
Total operating expenses 558 595 (6.22)% 1,136 1,127 .80 %
----------- ------------ ------------ ----------- ----------- -----------
Net Operating Income $ 2,946 $ 2,758 6.82 % $ 5,793 $ 5,515 5.04 %
----------- ------------ ------------ ----------- ----------- -----------
----------- ------------ ------------ ----------- ----------- -----------
Occupancy at June 30 98.85% 96.88%
----------- ------------
----------- ------------
</TABLE>
-18-
<PAGE>
BUSINESS SEGMENTS
Revenue and property net operating income in both the industrial and office
properties segments increased significantly in the three and six month periods
ended June 30, 1999 as compared to the prior year as a result of the property
acquisitions consummated in 1998 and 1999. Revenue and property net operating
income in the multifamily and other property segment decreased as a result of
the sales of the multifamily assets in 1998 and Urban Farms Shopping Center in
March 1999.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FOR SIX MONTHS ENDED JUNE 30, 1999 AND 1998
During the six months ended June 30, 1999, the Company generated $13.7 million
in cash flow from operating activities as compared to cash flow generated of
$4.9 million during the same period in 1998. This increase in operating cash
flow was a result of the cash flow generated from the various acquisitions
consummated by the Company during 1998 and 1999.
Cash used in investing activities in the six months ended June 30, 1999 was
$20.9 million as compared to $78.3 million of cash used during the same
periods in 1998. The decrease in cash used was primarily a result of the
decreased level of acquisition activity in 1999 as compared to the same
periods in 1998. Cash provided by financing activities was $5.7 million in
1999 as compared to $69.6 million of cash generated from financing activities
in the same period in 1998. The primary sources of the cash generated from
financing activities in 1998 were related to mortgage notes utilized to fund
property acquisitions during the first quarter of 1998.
CAPITALIZATION
As of June 30, 1999, the Company had $361.3 million of mortgage debt
outstanding. This mortgage debt matures between 2000 and 2022. The Company's
Credit Facility provides for borrowings up to $150 million and bears interest
at a variable rate equal to 30, 60 or 90-day Eurodollar or LIBOR rate plus a
spread on a sliding scale based on the Company's leverage. The scale ranges
from LIBOR +1.625% to LIBOR +2.25%. Based on the Company's leverage, the
current rate is LIBOR +2.00%. As of June 30, 1999, the Company had $138.5
million outstanding under the Credit Facility. The Company's weighted average
interest rate was approximately 7.4% at June 30, 1999. The Company's market
capitalization and debt-to-market capitalization ratio were $619.4 million
and 59.9% respectively, as of August 12, 1999 based upon the closing price of
the Company's common stock of $14.375 per share as of that date.
SHORT AND LONG TERM LIQUIDITY
The Company expects to meet its short-term (one year or less) liquidity needs
based on its cash flow from operations and, if necessary, borrowings from its
Credit Facility. The Company believes that its principal short-term liquidity
needs are to fund normal recurring operating expenses, recurring capital
improvements, debt service and distributions to its shareholders and holders of
OP Units.
-19-
<PAGE>
The Company expects to meet long-term liquidity requirements including property
acquisitions, debt maturities, major renovations, expansions and other
non-recurring capital improvements through its Credit Facility, the assumption
of additional indebtedness, additional term debt and the issuance of additional
equity securities. In July 1998, the Company filed with the Securities and
Exchange Commission a shelf registration statement under which the Company from
time to time may issue Common Stock, Preferred Stock and depository shares
representing Preferred Stock with an aggregate value of up to $500 million.
FUNDS FROM OPERATIONS AND FUNDS AVAILABLE FOR DISTRIBUTION
Funds From Operations ("FFO"), which is a commonly used measurement of
the performance of an equity REIT, as defined by the National Association of
Real Estate Investment Trusts, Inc. ("NAREIT"), is net income (computed in
accordance with generally accepted accounting principles), excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect FFO on the same basis. Management believes the
presentation of FFO is a useful disclosure as a general measurement of its
performance in the real estate industry, although the Company's FFO may not
necessarily be comparable to similarly titled measures of other REITs which do
not follow the NAREIT definition. The Company's FFO presentation is in
accordance with NAREIT's FFO definition. FFO does not represent cash generated
from operating activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available to fund cash
needs and should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flow as a measure of liquidity. Funds available for distribution ("FAD") is
defined as FFO reduced by straight-line rent adjustments; and non-revenue
enhancing capital expenditures and tenant improvements and leasing commissions;
and increased by amortization of deferred of financing costs and amortization of
restricted stock awards.
-20-
<PAGE>
FFO, FAD and cash flows for the three and six month periods ended June
30, 1999 and 1998 are summarized in the following table (in thousands, except
per share data):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income before distributions to preferred unitholders
and income allocated to preferred shareholders and minority
interest of unitholders in Operating Partnership $ 3,580 $ 7,022 $ 8,057 $ 15,532
(Less) Plus:
Gains on sales of assets --- (5,072) (1,284) (11,952)
Depreciation and amortization related to real estate 3,587 1,333 6,879 2,265
Equity in loss from equity method investments 4 299 490 461
FFO contribution from equity investments 39 (256) (405) (376)
Other adjustments 62 53 123 106
----------- ------------ ------------ ------------
Funds from Operations $ 7,272 $ 3,379 $ 13,860 $ 6,036
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
(Less) Plus:
Rental income from straight-line rents (350) (232) (670) (422)
Amortization of deferred financing costs 337 118 675 145
Amortization of restricted stock awards 68 --- 136 ---
Building improvements (260) (276) (315) (316)
Tenant improvements - second generation (432) (34) (660) (77)
Leasing commissions - second generation (480) (268) (691) (311)
----------- ------------ ------------ ------------
Funds Available for Distribution 6,155 2,687 12,335 5,055
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Cash flow from operating activities 13,776 4,919
Cash flow from investing activities (20,916) (78,328)
Cash flow from financing activities 5,684 69,591
------------ ------------
Net decrease in cash $ (1,456) $ (3,818)
------------ ------------
------------ ------------
Weighted average number of common and preferred shares
and units - diluted (1) 16,399,402 10,707,944 16,255,288 10,294,244
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
(1) Includes the shares of Convertible Preferred Stock and Convertible
Preferred OP Units issuable assuming conversion at $16.50 per share and
unit.
INFLATION
The Company's leases for commercial office and industrial properties
generally require tenants to pay either their share of operating expenses,
including common area maintenance, real estate taxes and insurance or pay 100%
of these costs directly (for triple net leases). As a result, the Company's
exposure to increases in costs and operating expenses is reduced. The Company
does not anticipate that inflation will have a significant impact on its
operating results in the near future.
-21-
<PAGE>
THE YEAR 2000 ISSUE
The Company is in the process of implementing a Year 2000 compliance
program which consists of the following steps:
1. Compilation of an inventory of information and property
systems which are impacted by the Year 2000.
2. Prioritization of the critical systems identified in Step 1
and inquiries of third parties with whom the Company does
significant business including but not limited to vendors,
service providers and tenants as to their Year 2000
compliance.
3. Analysis of critical systems and evaluation of the costs to
repair or replace those systems. Repair or replacement of
these systems and testing of the systems.
STATUS
The Company has compiled a complete inventory of systems which are
impacted by Year 2000 concerns. The Company's accounting and property
management systems are either already Year 2000 compliant or were upgraded by
the third party vendor who developed the software at no cost to the Company.
All of the Company's desktop and network systems are believed to be Year 2000
compliant. The Company has prepared an inventory of its buildings operating
systems to determine whether they are compliant. The implementation of any
required corrective measures will be completed by September 30, 1999. Based
upon the current status of this assessment, the Company estimates the cost of
these corrective measures will be less than $50,000.
The Company is exposed to the risk that its vendors or service
providers could experience Year 2000 problems that, in turn, impact their
ability to deliver products or services to the Company. This is not
considered to be a significant risk for suppliers of goods, due to the
availability of alternative suppliers, however, the disruption of certain
services, such as utilities could have a material impact on the Company's
operations. The Company is not currently aware of any vendor or service
provider Year 2000 issue which management believes would have a material
adverse impact on the Company's ability to operate its properties. The
inability of vendors or service providers to be Year 2000 compliant could
have an adverse impact on the Company, the effect of which is not
determinable at this time.
The Company is also exposed to the risk that its tenants could
experience Year 2000 problems that impact the tenants' ability to pay rent.
The Company does not believe that this risk is likely to effect enough
tenants to pose a material problem to the Company. The impact of
non-compliance by tenants is not determinable at this time.
Based on the current status of the Company's inventory of systems regarding
Year 2000 compliance, the Company has concluded it is not necessary to
develop a formal contingency plan. The Company will continue to evaluate the
need for such a formal plan.
Readers are cautioned that forward-looking statements contained in the Year
2000 discussion should be read in conjunction with the Company's disclosures
regarding forward-looking statements on page 17.
-22-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Properties are presently subject to any
litigation which the Company believes will result in any liability that will be
material to the Company, other than routine litigation arising in the ordinary
course of business, substantially all of which is expected to be covered by
liability insurance.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 3, 1999, the Company held its Annual Meeting of Stockholders. The final
vote of the matters presented for a vote at such meeting was as follows:
<TABLE>
<CAPTION>
Matter For Against Broker Abstain
- ------ --- ------- ------ -------
Non-vote
--------
<S> <C> <C> <C> <C>
(A) Election of Directors
Jeffrey E. Kelter 5,048,406 6,480 --- ---
Russell C. Platt 4,058,406 996,480 --- ---
(B) Proposal to approve the adoption of an Agreement and
Plan of Merger to effect a change from a Maryland
Corporation to a Maryland Statutory Real Estate
Investment Trust 4,389,647 5,665 --- 659,574
(C) Proposal to amend the Articles of Incorporation
changing the Company name to "Keystone Property
Trust" 4,380,880 12,065 --- 661,941
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 First Amended and Restated Revolving Credit Agreement among
the Company, as the Operating Partnership and the Lenders
named therein dated as of June 30, 1999.
27. Financial Data Schedule
(b) Reports on Form 8-K:
None
-23-
<PAGE>
SIGNATURES OF REGISTRANT
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.
AMERICAN REAL ESTATE
INVESTMENT CORPORATION
Date: August 13, 1999 By: /s/ Jeffrey E. Kelter
---------------------
Jeffrey E. Kelter
President and Chief Executive
Officer
Date: August 13, 1999 By: /s/ Timothy A. Peterson
-----------------------
Timothy A. Peterson
Executive Vice President, Chief
Financial Officer and Secretary
Date: August 13, 1999 By: /s/ Timothy E. Mckenna
----------------------
Timothy E. McKenna
Treasurer, Senior Vice President
Finance & Corporate Controller
(Principal Accounting Officer)
-24-
<PAGE>
EXHIBIT 10-1
FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this
"Agreement") is made as of the 30th day of June, 1999, by and among AMERICAN
REAL ESTATE INVESTMENT, L.P., a Delaware limited partnership ("Borrower"),
AMERICAN REAL ESTATE INVESTMENT CORPORATION, a Maryland corporation ("REA"),
each having its principal place of business at 620 West Germantown Pike,
Plymouth Meeting, Pennsylvania 19462, BANKBOSTON, N.A. ("BankBoston"), the
other lending institutions which are parties to this Agreement as "Lenders",
and the other lending institutions that may become parties hereto pursuant to
Section 18 (together with BankBoston, the "Lenders"), BANKBOSTON, N.A., as
Agent for the Lenders (the "Agent") and FIRST UNION NATIONAL BANK, as
documentation agent.
R E C I T A L S
WHEREAS, Borrower, REA, Agent, BankBoston and certain of the Lenders
entered into that certain Revolving Credit Agreement, dated April 29, 1998, as
amended by that certain First Amendment to Revolving Credit Agreement and Other
Loan Documents, dated July 22, 1998, by and among Borrower, REA, Agent,
BankBoston and certain of the Lenders and certain of the Guarantors, as amended
by that certain Second Amendment to Revolving Credit Agreement and Other Loan
Documents, dated October 16, 1998, by and among Borrower, REA, Agent, BankBoston
and certain of the Guarantors, as further amended by that certain Third
Amendment to Revolving Credit Agreement and Other Loan Documents, dated October
16, 1998, by and among Borrower, REA, Agent, BankBoston, certain of the Lenders
and certain of the Guarantors, as further amended by that certain Fourth
Amendment to Revolving Credit Agreement and Other Loan Documents, dated November
30, 1998, by and among Borrower, REA, Agent, BankBoston, certain of the Lenders
and certain of the Guarantors, and as further amended by that certain Fifth
Amendment to Revolving Credit Agreement and Other Loan Documents, dated April
26, 1999, by and among Borrower, REA, Agent, BankBoston, certain of the Lenders
and certain of the Guarantors (collectively, the "Original Loan Agreement"); and
WHEREAS, Borrower has requested that Agent and the Lenders modify
certain provisions of the Original Loan Agreement; and
WHEREAS, Borrower, the Lenders and Agent desire to amend and restate
the Original Loan Agreement in its entirety; and
<PAGE>
NOW, THEREFORE, in consideration of the recitals herein and mutual
covenants and agreements contained herein, the parties hereto hereby amend and
restate the Original Loan Agreement in its entirety and covenant and agree as
follows:
Section 1 DEFINITIONS AND RULES OF INTERPRETATION.
Section 1.1 DEFINITIONS. The following terms shall have the meanings
set forth in this Section l or elsewhere in the provisions of this Agreement
referred to below:
AFFILIATE. As applied to any Person, (i) any other Person
directly or indirectly Controlling, Controlled by, or under common Control with
such Person; (ii) any officer, director, member, partner or shareholder of such
Person; or (iii) if such Person is an individual, any member of the immediate
family (including parents, spouse, children and siblings) of such individual,
any trust whose principle beneficiary is such individual or one or more members
of the immediate family of such individual and any Person who Controls, is
Controlled by or is under common Control with any such trust.
AGENT. BankBoston, N.A., acting as administrative agent for
the Lenders, and its successors and assigns.
AGENT'S HEAD OFFICE. The Agent's head office located at 100
Federal Street, Boston, Massachusetts 02110, or at such other location as the
Agent may designate from time to time by notice to the Borrower and the Lenders.
AGREEMENT. This First Amended and Restated Revolving Credit
Agreement, including the SCHEDULES and EXHIBITS hereto.
APPLICABLE MARGIN. On any date, the applicable margin set
forth below based on the ratio of the Consolidated Total Liabilities of REA to
the Consolidated Total Assets of REA:
<TABLE>
<CAPTION>
Ratio LIBOR Rate Loans
----- ----------------
<S> <C>
60% or greater 2.00%
Greater than or equal to 55% but less than 60%. 1.875%
Greater than or equal to 50% but less than 55% 1.75%
Less than 50% 1.625%
</TABLE>
Notwithstanding the foregoing, commencing on October 1, 1999, if at any time the
ratio of the Consolidated Total Liabilities of REA to the Consolidated Total
Assest of REA is greater than or
2
<PAGE>
equal to 60%, then the corresponding Applicable Margin shall be 2.25%. The
Applicable Margin shall not be reduced based upon the above ratios until five
(5) Business Days following the delivery by Borrower to Agent of such evidence
as the Agent may require (including without limitation, the delivery of the
Compliance Certificate to the Agent) that such ratio is less than the threshold
indicated above which corresponds to such reduced Applicable Margin. In the
event of any change in such ratio that would cause the Applicable Margin to
increase, the Borrower shall notify the Agent within five (5) Business Days of
such event, and regardless of whether Agent has received notice of such event,
such event shall effect a change in the Applicable Margin on the first to occur
of (a) the first Business Day after the delivery of such notice to Agent of such
event or (b) six (6) Business Days following the increase of such ratio to the
threshold indicated above which corresponds to such increased Applicable Margin.
APPRAISAL. An MAI appraisal of the value of a parcel of Real
Estate, determined on a fair value basis, performed by an independent appraiser
selected by the Agent who is not an employee of the Borrower, REA, the
Guarantors, the Agent or a Lender or any Affiliate of any thereof, the form and
substance of such appraisal and the identity of the appraiser to be in
accordance with regulatory laws and policies (both regulatory and internal)
applicable to the Lenders and otherwise reasonably acceptable to the Agent.
APPRAISED VALUE. The fair value of a Mortgaged Property
determined by the most recent Appraisal or update obtained pursuant to Section
5.2, subject, however, to such changes or adjustments to the value determined
thereby as provided in Section 5.2(d).
ASSIGNMENT OF LEASES AND RENTS. Each of the assignments of
leases and rents from the Borrower, REA or a Guarantor to the Agent, as it may
be modified or amended, pursuant to which there shall be assigned to the Agent
for the benefit of the Lenders a security interest in the interest of the
Borrower, REA or such Guarantor as lessor with respect to all Leases of all or
any part of each Mortgaged Property, each such assignment to be substantially in
the form of EXHIBIT A annexed hereto.
BALANCE SHEET DATE. December 31, 1998.
BANKBOSTON. As defined in the preamble.
BASE RATE. The greater of (a) the fluctuating annual rate of
interest announced from time to time by the Agent at the Agent's Head Office as
its "base rate" or (b) one-half of one percent (0.5%) above the Federal Funds
Effective Rate (rounded upwards, if necessary, to the next one-eighth of one
percent). Any change in the rate of interest payable hereunder resulting from a
change in the Base Rate shall become effective as of the opening of business on
the day on which such change in the Base Rate becomes effective.
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BASE RATE LOANS. Those Loans bearing interest calculated by
reference to the Base Rate.
BORROWER. As defined in the preamble hereto.
BORROWING BASE. At any time the Borrowing Base shall be the
aggregate for all Mortgaged Properties of the lesser of the following amounts as
most recently determined or calculated by the Agent for each Mortgaged Property:
(a) sixty-five percent (65%) of the Appraised Value of such Mortgaged Property,
and (b) sixty-five percent (65%) of the purchase price and ordinarily related
reasonable purchase transaction costs of such Mortgaged Property paid or to be
paid at or prior to the inclusion of such Mortgaged Property in the Collateral
by the Borrower, REA or a Guarantor, without deduction for depreciation, or if
developed by Borrower, REA or a Guarantor sixty-five percent (65%) of the
purchase price of the undeveloped land plus the completed construction costs
paid or to be paid at or prior to the inclusion of such Mortgaged Property in
the Collateral by the Borrower, REA or a Guarantor, determined in accordance
with GAAP, without deduction for depreciation.
BUILDING. With respect to each Mortgaged Property or parcel of
Real Estate, all of the buildings, structures and improvements now or hereafter
located thereon.
BUSINESS DAY. Any day on which banking institutions located in
the same city and State as the Agent's Head Office are located are open for the
transaction of banking business and, in the case of Eurodollar Rate Loans, which
also is a Eurodollar Business Day.
CAPITAL EVENT PROCEEDS. (i) Any proceeds resulting from the
sale, exchange, transfer, financing or refinancing of all or any portion of any
Mortgaged Property and (ii) any other extraordinary, non-recurring income
generated by any Mortgaged Property (other than rental loss or business
interruption proceeds with respect to any Mortgaged Property), in each case net
of reasonable transaction costs and/or reasonable amounts actually expended to
collect the same.
CAPITAL IMPROVEMENT PROJECT. With respect to any Real Estate
now or hereafter owned or leased by the Borrower, REA, a Guarantor or any of
their respective Subsidiaries, capital improvements consisting of
rehabilitation, refurbishment, replacement and improvements to the existing
Buildings on such Real Estate which may be properly capitalized under GAAP.
CAPITAL IMPROVEMENT RESERVE. With respect to any Real Estate
now or hereafter owned or leased by the Borrower, REA, any Guarantor or any of
their respective Subsidiaries, a reserve for Capital Improvement Projects,
leasing commissions and tenant improvements in an amount equal to (i) fifteen
cents ($.15) multiplied by the Net Rentable Area contained therein for
industrial properties, (ii) seventy-five cents ($.75) multiplied by the Net
Rentable Area contained
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therein for office properties, (iii) twenty-five cents ($.25) multiplied by the
Net Rentable Area contained therein for any strip mall retail shopping center
that the Borrower may be permitted to acquire under Section 8.3 hereof and (iv)
the amount reasonably determined by the Agent in its good faith business
judgment with respect to any other type of Real Estate that the Majority Lenders
may elect in their sole discretion to approve as Eligible Real Estate in
accordance with this Agreement.
CAPITALIZED LEASE. A lease under which the discounted future
rental payment obligations of the lessee or the obligor are required to be
capitalized on the balance sheet of such Person in accordance with GAAP.
CERCLA. See Section 6.20.
CLOSING DATE. June ___, 1999.
CODE. The Internal Revenue Code of 1986, as amended.
COLLATERAL. All of the property, rights and interests of the
Borrower, REA and each Guarantor which are or are intended to be subject to the
security interests, security title, liens and mortgages created by the Security
Documents, including, without limitation, the Mortgaged Properties.
COMMITMENT. With respect to each Lender, the amount set forth
on SCHEDULE 1 hereto as the amount of such Lender's commitment to make or
maintain Loans to the Borrower, as the same may be changed from time to time in
accordance with the terms of this Agreement.
COMMITMENT PERCENTAGE. With respect to each Lender, the
percentage set forth on SCHEDULE 1 hereto as such Lender's percentage of the
Total Commitment, as the same may be changed from time to time in accordance
with the terms of this Agreement.
COMPLIANCE CERTIFICATE. See Section 7.4(c).
CONDEMNATION PROCEEDS. All compensation, awards, damages,
rights of action and proceeds awarded to the Borrower, REA or a Guarantor by
reason of any Taking, net of all reasonable amounts actually expended to collect
the same.
CONSOLIDATED. With reference to any term defined herein, that
term as applied to the accounts of a Person and its Subsidiaries, determined on
a consolidated basis in accordance with GAAP.
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CONSOLIDATED OPERATING CASH FLOW. With respect to any
Determination Period of a Person, an amount equal to the Operating Cash Flow of
such Person and its Subsidiaries for such Determination Period determined on a
consolidated basis in accordance with GAAP.
CONSOLIDATED TANGIBLE NET WORTH. With respect to any Person,
the Tangible Net Worth of such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
CONSOLIDATED TOTAL ASSETS. With respect to any Person, the
Total Assets of such Person and its Subsidiaries determined on a consolidated
basis in accordance with GAAP.
CONSOLIDATED TOTAL LIABILITIES. With respect to any Person,
the Total Liabilities of such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
CONSTRUCTION INSPECTOR. EMG, or another firm of professional
engineers or architects selected by the Agent and, so long as no Default or
Event of Default exists hereunder, reasonably acceptable to the Borrower.
CONTROL (including, with correlative meanings, the terms
"Controlling", "Controlled by" and "under common Control with"). As applied to
any Person, the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, ownership interests, by contract or
otherwise.
CONVERSION/CONTINUATION REQUEST. A notice given by the
Borrower to the Agent of its election to convert or continue a Loan in
accordance with Section 4.1.
DEBT SERVICE. For any Person and any Determination Period, the
sum of all interest (including capitalized interest) and mandatory principal
payments due and payable during such period in respect of any Indebtedness of
such Person excluding any balloon payments due upon maturity of any such
Indebtedness.
DEFAULT. See Section 12.1.
DETERMINATION PERIOD. Any period of time for which Debt
Service, Gross Cash Receipts, Interest Expense, Net Income (or Deficit), Net
Operating Income, Operating Cash Flow and/or Operating Expenses are being
determined in accordance with the terms of this Agreement.
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DISTRIBUTION. With respect to any Person, the declaration or
payment of any cash, dividend or distribution on or in respect of any shares of
any class of capital stock or other beneficial interest of such Person; the
purchase, redemption, exchange or other retirement by such Person of any shares
of any class of capital stock or other beneficial interest of such Person,
directly or indirectly through a Subsidiary of such Person or otherwise; the
return of capital by such Person to its shareholders or partners as such; or any
other distribution on or in respect of any shares of any class of capital stock
or other beneficial interest of such Person; provided, however, that the
dividend or distribution of common stock of a Person shall not constitute a
Distribution with respect to such Person.
DOLLARS or $. Dollars in lawful currency of the United States
of America.
DOMESTIC LENDING OFFICE. Initially, the office of each Lender
designated as such on SCHEDULE 1 hereto; thereafter, such other office of such
Lender, if any, located within the United States that will be making or
maintaining Base Rate Loans.
DRAWDOWN DATE. The date on which any Loan is made or is to be
made, and the date on which any Loan which is made prior to the Maturity Date is
converted in accordance with Section 4.1.
ELIGIBLE GROUND LEASE. Any lease (a) which is a ground lease
granted by the fee owner of Real Estate (whether directly or by assignment) to
the Borrower, REA or a Guarantor, (b) which may be encumbered, transferred
and/or assigned without the consent of the lessor, (c) which has a remaining
term (including any renewal terms exercisable at the sole option of the lessee)
of at least 40 years or if less than 40 years, includes a provision acceptable
to the Agent pursuant to which the lessee has the right to obtain title to the
fee interest in the Real Estate from the lessor upon the payment of a nominal
purchase price, (d) under which no default has occurred and is continuing, and
(e) which contains terms and conditions satisfactory to the Agent including,
without limitation, mortgagee protection provisions to the effect that (i) the
lessor shall notify any holder of a security interest in such lease of the
occurrence of any default by the lessee under such lease and shall afford such
holder a reasonable period of time to cure such default, (ii) the lessor shall
not terminate the lease because of a default by the lessee thereunder during any
period in which any holder of a security interest in such lease is in the
process of prosecuting remedies to obtain possession of the leasehold estate in
the Real Estate, and (iii) in the event that such lease is terminated, any
holder of a security interest in such lease shall have the option to enter into
a new lease with the lessor for the remainder of the term thereof and having
terms substantially identical to those contained in the terminated lease.
ELIGIBLE REAL ESTATE. Real Estate:
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(a) which is owned in fee or leased pursuant to an Eligible
Ground Lease (or other ground lease acceptable to the Majority Lenders
in their sole discretion) by the Borrower, REA or a Guarantor;
(b) which is located within the contiguous 48 States of the
continental United States, excluding those States which prescribe a
"single-action" or similar rule limiting the rights of creditors
secured by real property, which exclusion shall apply, without
limitation, to the States of California and Washington except to the
extent such exclusion is waived in writing by the Majority Lenders with
respect to a specific parcel of Real Estate;
(c) which is improved by an office and/or industrial Building
or other income-producing Real Estate satisfactory to the Majority
Lenders;
(d) which is approved by the Majority Lenders in their sole
judgment;
(e) as to which all of the representations set forth in
Section 6 of this Agreement concerning Mortgaged Property are true and
correct;
(f) as to which the Agent has received all Eligible Real
Estate Qualification Documents;
(g) whose Borrowing Base does not exceed twenty percent (20%)
of the aggregate Borrowing Base of such Real Estate and all Mortgaged
Properties; and
(h) which does not cause the Borrower to be in violation of
the covenants set forth in Section 5.5.
ELIGIBLE REAL ESTATE QUALIFICATION DOCUMENTS. See SCHEDULE 3
attached hereto.
EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the
meaning of Section 3(3) of ERISA maintained or contributed to by either of the
Borrower or any ERISA Affiliate, other than a Guaranteed Pension Plan or
Multiemployer Plan.
ENVIRONMENTAL ENGINEER. EMG or another firm of independent
professional engineers or other scientists generally recognized as expert in the
detection, analysis and remediation of Hazardous Substances and related
environmental matters and acceptable to the Agent and, so long as no Default or
Event of Default exists hereunder, reasonably acceptable to the Borrower
ENVIRONMENTAL LAWS. See Section 6.20(a).
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EQUITY OFFERING. The issuance and sale after the Closing Date
by the Borrower, REA or any Guarantor of any equity securities of such Person.
ERISA. The Employee Retirement Income Security Act of 1974, as
amended and in effect from time to time.
ERISA AFFILIATE. Any Person which is treated as a single
employer with the Borrower, REA, the Guarantors or their respective Subsidiaries
under Section 414 of the Code.
ERISA REPORTABLE EVENT. A reportable event with respect to a
Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the
regulations promulgated thereunder as to which the requirement of notice has not
been waived.
EUROCURRENCY RESERVE RATE. For any day with respect to a
Eurodollar Rate Loan, the maximum rate (expressed as a decimal) at which any
Lender subject thereto would be required to maintain reserves under Regulation D
of the Board of Governors of the Federal Reserve System (or any successor or
similar regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D or any successor or similar
regulation), if such liabilities were outstanding. The Eurodollar Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurocurrency Reserve Rate.
EURODOLLAR BUSINESS DAY. Any day on which commercial banks are
open for international business (including dealings in Dollar deposits) in
London or such other interbank eurodollar market as may be selected by the
Reference Bank in its sole discretion acting in good faith.
EURODOLLAR LENDING OFFICE. Initially, the office of each
Lender designated as such on SCHEDULE 1 hereto; thereafter, such other office of
such Lender, if any, that shall be making or maintaining Eurodollar Rate Loans.
EURODOLLAR RATE. For any Interest Period with respect to a
Eurodollar Rate Loan, the rate per annum equal to the quotient (rounded upwards
to the nearest 1/16 of one percent) of (a) the rate at which the Reference
Bank's Eurodollar Lending Office is offered Dollar deposits three (3) Eurodollar
Business Days prior to the beginning of such Interest Period in whatever
interbank eurodollar market may be selected by the Reference Bank in its sole
discretion, acting in good faith, for delivery on the first day of such Interest
Period for the number of days comprised therein and in an amount comparable to
the amount of the Eurodollar Rate Loan to which such Interest Period applies,
divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate.
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EURODOLLAR RATE LOANS. Loans bearing interest calculated by
reference to a Eurodollar Rate.
EVENT OF DEFAULT. See Section 12.1.
FEDERAL FUNDS EFFECTIVE RATE. For any day, the rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published the average of the quotations for such day
on such transactions received by the Agent from three (3) Federal funds brokers
of recognized standing selected by the Agent.
FUNDS FROM OPERATIONS. With respect to any Person for any
fiscal period, an amount equal to the Net Income (or Deficit) of such Person for
such period, computed in accordance with GAAP, excluding financing costs and
gains (or losses) from debt restructuring and sales of property, but including
depreciation and amortization and other non-cash items.
GAAP. Principles that are (a) consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, as in effect from time to time and (b) consistently applied with
past financial statements of the Person adopting the same principles; PROVIDED
that a certified public accountant would, insofar as the use of such accounting
principles is pertinent, be in a position to deliver an unqualified opinion
(other than a qualification regarding changes in generally accepted accounting
principles) as to financial statements in which such principles have been
properly applied.
GROSS CASH RECEIPTS. Gross Cash Receipts shall mean with
respect to a Mortgaged Property the sum of cash received during any
Determination Period by or for the account of the Borrower, REA or the Guarantor
which owns or leases such Mortgaged Property in payment of the following items:
(a) rentals, including minimum or base rent, percentage rent,
and rent attributable to recovery of tenant improvements costs received
from tenants occupying space in such Mortgaged Property.
(b) all amounts paid by tenants under Leases with respect to
taxes and assessments imposed on such Mortgaged Property or in
reimbursement of Operating Expenses of such Mortgaged Property;
(c) parking revenues received in connection with the operation
of parking facilities at such Mortgaged Property; and
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(d) receipts from vending machines, recreational facilities
and any and all other operating revenues received from such Mortgaged
Property.
In the event that the Borrower, REA or a Guarantor receives a
payment of Gross Cash Receipts other than on a monthly basis, then for the
purpose of determining the Gross Cash Receipts for any Determination Period,
only the amount of such payment which relates to such Determination Period (as
opposed to a period either before or after such Determination Period) shall be
included in the calculation of Gross Cash Receipts for such Determination
Period.
Any payment of Gross Cash Receipts received from a tenant of a
Mortgaged Property which is delinquent shall be applied to the oldest
outstanding delinquencies relating to such tenant.
If the Borrower, REA or a Guarantor shall receive cash by
reason of Insurance Proceeds, proceeds of rental loss or business interruption
insurance (except to the extent that such proceeds replace the rental payments
which otherwise would have been due to the Borrower or a Guarantor from tenants
of a Mortgaged Property), title insurance, the forfeiting by tenants of security
or other deposits (except the forfeiting by tenants of security or other
deposits to pay rent), Condemnation Proceeds, Capital Event Proceeds, or any
other items of income which are extraordinary or of a non-recurring nature, such
amounts shall not be included in Gross Cash Receipts. Gross Cash Receipts for
any Determination Period shall include that portion of any payments made by
tenants prior to or during such Determination Period to cancel their Leases
which is equal to the rent that would have otherwise been payable during such
Determination Period under such Leases, provided that if the space vacated by
any such tenant is subsequently re-let for all or any portion of a Determination
Period, any rent paid by the new tenant during such period shall be deemed
included in Gross Cash Receipts for such Determination Period and a
corresponding portion of any lease cancellation payment attributable to such
period shall not be included in Gross Cash Receipts for such period. Gross Cash
Receipts shall not include any amounts payable by tenants holding over pursuant
to expired or terminated Leases. With respect to tenants which are occupying a
Mortgaged Property pursuant to a month-to-month Lease, Gross Cash Receipts from
such Leases shall not exceed five percent (5%) of the aggregate Gross Cash
Receipts in any Determination Period. In addition, Gross Cash Receipts for any
Determination Period shall be reduced by such amount as may be required by the
Agent as a result of negative factors affecting the occupancy of a Mortgaged
Property during such Determination Period and/or the fiscal quarter immediately
following such period as determined by the Agent in its good faith business
judgment, such as defaults by tenants under Leases, potential set-off against
rent, landlord concessions which become effective following a Determination
Period or anticipated or actual lease terminations or expirations. For example
(but without limiting the generality of the foregoing), in the event that a
Lease is scheduled to terminate in the fiscal quarter immediately following a
Determination Period, the Agent may
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exclude all Gross Cash Receipts received pursuant to such Lease for such
Determination Period. Any such reduction in Gross Cash Receipts as a result of
terminated or expired Leases, or Leases which are due to terminate or expire,
shall be offset by such amount as may be approved by the Agent in its good faith
business judgment as a result of executed Leases for the premises covered by the
terminated or expired Lease.
Gross Cash Receipts shall be determined on the basis of sound
cash basis accounting practices applied on a consistent basis.
GUARANTEED PENSION PLAN. Any employee pension benefit plan
within the meaning of Section 3(2) of ERISA maintained or contributed to by the
Borrower, REA or a Guarantor or any ERISA Affiliate the benefits of which are
guaranteed on termination in full or in part by the PBGC pursuant to Title IV of
ERISA, other than a Multiemployer Plan.
GUARANTORS. Each wholly-owned Subsidiary of the Borrower
owning a Mortgaged Property which becomes a Guarantor in accordance herewith.
GUARANTY. Each Unconditional Guaranty of Payment and
Performance which is required to be executed and delivered to the Agent by a
Guarantor pursuant to Section 5.3 hereof, as the same may be modified or
amended; and pursuant to which such Guarantor guarantees the Obligations to the
extent provided therein, each such guaranty to be substantially in the form of
EXHIBIT B annexed hereto.
HAZARDOUS SUBSTANCES. See Section 6.20(B).
IMPLIED POOL DEBT SERVICE. As of any date of determination,
the annual Debt Service of the Borrower that would be payable on a loan amount
equal to the Borrowing Base based on a twenty-five (25) year mortgage style
amortization schedule and bearing interest at a rate per annum equal to the then
current yield on ten (10) year obligations issued by the United States Treasury
most recently prior to the date of determination plus two and one quarter
percent (2.25%). The Implied Pool Debt Service shall be determined by Agent and
any such determination, so long as the same shall be made by Agent in the
exercise of its good faith business judgment, shall be conclusive and binding
absent manifest error.
INDEBTEDNESS. All obligations, contingent and otherwise, that
in accordance with GAAP should be classified upon a Person's balance sheet as
liabilities, or to which reference should be made by footnotes thereto,
including in any event and whether or not so classified: (a) all debt and
similar monetary obligations, whether direct or indirect (including, without
limitation, any obligations evidenced by bonds, debentures, notes or similar
debt instruments and all subordinated debt); (b) all liabilities secured by any
mortgage, pledge, security interest, lien, charge or other encumbrance existing
on property owned or acquired subject thereto, whether or
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not the liability secured thereby shall have been assumed; (c) all guarantees,
endorsements and other contingent obligations whether direct or indirect in
respect of indebtedness of others, including any obligation to supply funds to
or in any manner to invest directly or indirectly in a Person, to purchase
indebtedness, or to assure the owner of indebtedness against loss through an
agreement to purchase goods, supplies or services for the purpose of enabling
the debtor to make payment of the indebtedness held by such owner or otherwise,
and the obligation to reimburse the issuer in respect of any letter of credit;
(d) any obligation as a lessee or obligor under a Capitalized Lease; (e) a
Person's PRO RATA share of any of the above-described obligations of its
unconsolidated Affiliates; (f) all indebtedness, obligations or other
liabilities (other than interest expense liability) under or with respect to (i)
interest rate swap, collar, cap or similar agreements providing interest rate
protection (collectively, the "Swap Agreements") (provided, however,
indebtedness, obligations or other liabilities under the Swap Agreements shall
not constitute Indebtedness if such Swap Agreements are approved by the Majority
Lenders or if the indebtedness, obligations or other liabilities under such Swap
Agreements are in an aggregate amount not exceeding $2,500,000.00) and (ii)
foreign currency exchange agreements; and (g) subject to Section 8.15, equity
forward agreements or other equity swap agreements classified as debt or
liabilities pursuant to GAAP or recommended to be classified as debt or
liabilities by the Financial Accounting Standards Board (the "FASB"), including,
without limitation, that certain Summary of Board Decisions Through July 22,
1998 issued by FASB. The amount of any Indebtedness under a Swap Agreement shall
be deemed to be the current termination liability in respect thereof as
determined by Agent in good faith pursuant to Agent's normal underwriting
standards for similar type agreements.
INDEMNITY AGREEMENTS. Each of the Indemnity Agreements
Regarding Hazardous Materials now or hereafter made by the Borrower, REA or a
Guarantor in favor of the Agent and the Lenders, as the same may be modified or
amended, pursuant to which the Borrower, REA and each Guarantor agree to
indemnify the Agent and the Lenders with respect to Hazardous Substances and
Environmental Laws, each such agreement to be substantially in the form of
EXHIBIT C annexed hereto.
INSURANCE PROCEEDS. All insurance proceeds, damages, claims
and rights of action and the right thereto under any insurance policies relating
to any portion of any Collateral, net of all reasonable amounts actually
expended to collect the same.
INTEREST EXPENSE. For any Determination Period, the sum of all
interest (including capitalized interest) due and payable during such
Determination Period by the Borrower, REA, each Guarantor and their respective
Subsidiaries on a consolidated basis during such Determination Period.
INTEREST PAYMENT DATE. As to each Loan, the first (1st) day of
each calendar month during the term of such Loan.
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INTEREST PERIOD. With respect to each Eurodollar Rate Loan (a)
initially, the period commencing on the Drawdown Date of such Eurodollar Rate
Loan and ending one, two or three months thereafter, and (b) thereafter, each
period commencing on the day following the last day of the next preceding
Interest Period applicable to such Loan and ending on the last day of one of the
periods set forth above, as selected by the Borrower in a Loan Request or
Conversion/Continuation Request; PROVIDED that all of the foregoing provisions
relating to Interest Periods are subject to the following:
(A) if any Interest Period with respect to a Eurodollar Rate
Loan would otherwise end on a day that is not a Eurodollar Business
Day, such Interest Period shall end on the next succeeding Eurodollar
Business Day, unless such next succeeding Eurodollar Business Day
occurs in the next calendar month, in which case such Interest Period
shall end on the next preceding Eurodollar Business Day, as determined
conclusively by the Reference Bank in accordance with the then current
bank practice in the applicable Eurodollar interbank market; and (B) if
the Borrower shall fail to give notice as provided in Section 4.1, the
Borrower shall be deemed to have requested a conversion of the affected
Eurodollar Rate Loan to a Base Rate Loan on the last day of the then
current Interest Period with respect thereto; and
(B) no Interest Period relating to any Eurodollar Rate Loan
shall extend beyond the Maturity Date.
INVESTMENTS. With respect to any Person, all shares of capital
stock, evidences of Indebtedness and other securities issued by any other Person
and owned by such Person, all loans, advances, or extensions of credit to, or
contributions to the capital of, any other Person, all purchases of the
securities or business or integral part of the business of any other Person and
commitments and options to make such purchases, all interests in real property,
and all other investments; PROVIDED, HOWEVER, that the term "Investment" shall
not include (i) equipment, inventory and other tangible personal property
acquired in the ordinary course of business, or (ii) current trade and customer
accounts receivable for services rendered in the ordinary course of business and
payable in accordance with customary trade terms. In determining the aggregate
amount of Investments outstanding at any particular time: (a) there shall be
included as an Investment all interest accrued with respect to Indebtedness
constituting an Investment unless and until such interest is paid; (b) there
shall be deducted in respect of each Investment any amount received as a return
of capital; (c) there shall not be deducted in respect of any Investment any
amounts received as earnings on such Investment, whether as dividends, interest
or otherwise, except that accrued interest included as provided in the foregoing
clause (a) may be deducted when paid; and (d) there shall not be deducted in
respect of any Investment any decrease in the value thereof.
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LEASE SUMMARIES. Summaries of the material terms of the
Leases. Such Lease Summaries shall be in form and substance reasonably
satisfactory to the Agent.
LEASES. Leases, licenses and agreements, whether written or
oral, relating to the use or occupation of space in any Building or of any Real
Estate.
LENDERS. BankBoston, the other lending institutions which are
party hereto and any other Person which becomes an assignee of any rights of a
Lender pursuant to Section 18 (but not including any participant as described in
Section 18).
LOAN DOCUMENTS. This Agreement, the Notes, the Security
Documents and all other documents, instruments or agreements now or hereafter
executed or delivered by or on behalf of the Borrower, REA or any Guarantor in
connection with the Loans.
LOAN REQUEST. See Section 2.6.
LOANS. The aggregate Loans to be made by the Lenders
hereunder.
MAJORITY LENDERS. As of any date, the Lender or Lenders whose
aggregate Commitment Percentage is equal to or greater than 66 2/3%.
MANAGEMENT AGREEMENTS. Agreements, whether written or oral,
providing for the management of the Mortgaged Properties or any of them.
MATURITY DATE. April 29, 2002 or such earlier date on which
the Loans shall become due and payable pursuant to the terms hereof.
METROPOLITAN STATISTICAL AREA. A geographic area designated as
a "Metropolitan Statistical Area" by the United States Office of Management and
Budget and included in published standards that are applied to data promulgated
by the United States Census Bureau.
MINORITY INTEREST. As to any Person, an ownership or other
equity investment in any other Person, which investment is not consolidated with
the accounts of such Person in accordance with GAAP.
MINIMUM TANGIBLE NET WORTH. At any time, the sum of (a)
$190,000,000.00 plus (b) eighty percent (80%) of the aggregate net proceeds
received by the Borrower, REA or any other Guarantor after the Closing Date in
connection with any Equity Offering to any other Person.
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MORTGAGED PROPERTY OR MORTGAGED PROPERTIES. The Eligible Real
Estate owned by the Borrower, REA or a Guarantor which is security for the
Obligations pursuant to the Mortgages.
MORTGAGES. The Mortgages, Deeds to Secure Debt and/or Deeds of
Trust from the Borrower, REA or a Guarantor to the Agent for the benefit of the
Lenders (or to trustees named therein acting on behalf of the Agent for the
benefit of the Lenders), as the same may be modified or amended, pursuant to
which the Borrower, REA or a Guarantor has conveyed or granted a mortgage lien
upon or a conveyance in fee simple of a Mortgaged Property as security for the
Obligations, each such mortgage to be substantially in the form of EXHIBIT D
annexed hereto.
MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning
of Section 3(37) of ERISA maintained or contributed to by the Borrower, REA or
any ERISA Affiliate.
NET INCOME (OR DEFICIT). With respect to any Person (or any
asset of any Person) for any Determination Period, the Net Income (or Deficit)
of such Person (or attributable to such asset), after deduction of all expenses,
taxes and other proper charges, determined in accordance with GAAP. The Net
Income (or Deficit) of a Person shall include, without duplication, the
allocable share of the Net Income (or Deficit) of any other Person in which a
Minority Interest is owned by such Person based on the ownership of such Person
in such other Person.
NET OPERATING INCOME. For any Determination Period for a
Mortgaged Property, the sum of Gross Cash Receipts from such Mortgaged Property
for such Determination Period less Operating Expenses of such Mortgaged Property
for such Determination Period.
NET RENTABLE AREA. With respect to any Real Estate, the floor
area of any buildings, structures or improvements available for leasing to
tenants determined in accordance with the Rent Roll for such Real Estate, the
manner of such determination to be reasonably consistent for all Real Estate of
the same type unless otherwise approved by the Agent.
NOMURA INDEBTEDNESS. The obligations of FLIP/BRE, INC., a New
Jersey corporation ("FLIP"), OIP/BRE, L.L.C., a New Jersey limited liability
company ("OIP"), MBP/BRE, L.L.C., a New Jersey limited liability company
("MBP"), and NJA/BRE, L.L.C., a New Jersey limited liability company ("NJA" and,
together with FLIP, OIP and MBP, the "NOMURA BORROWERS") to Nomura Asset Capital
Corporation ("NOMURA") pursuant to the Loan Agreement dated as of September 22,
1997 among Nomura and the Nomura Borrowers.
NON-RECOURSE INDEBTEDNESS. Indebtedness of a Person which is
secured by Real Estate (other than the Mortgaged Properties) and related
personal property or interests therein and is not a general obligation of such
Person, the holder of such Indebtedness having recourse
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solely to the Real Estate and related personal property or interests therein
securing such Indebtedness, the Building and Leases thereon and the rents and
profits thereof. The loan documents relating to such Non-recourse Indebtedness
may contain customary exceptions to the limitation on recourse to such Person
and its partners or other principals and still be considered as Non-recourse
Indebtedness for the purposes hereof.
NOTES. See Section 2.4.
NOTICE. See Section 19.
OBLIGATIONS. All indebtedness, obligations and liabilities of
the Borrower, REA or any Guarantor to any of the Lenders or the Agent,
individually or collectively, under this Agreement or any of the other Loan
Documents or in respect of any of the Loans or the Notes, or other instruments
at any time evidencing any of the foregoing, whether existing on the date of
this Agreement or arising or incurred hereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise.
OPERATING CASH FLOW. With respect to any Person (or any asset
of any Person), for any Determination Period, an amount equal to the sum of (a)
the Net Income of such Person (or attributable to such asset) for such
Determination Period plus (b) depreciation and amortization, Interest Expense
and any extraordinary or non-recurring losses deducted in calculating such Net
Income MINUS (c) any extraordinary or non-recurring gains included in
calculating such Net Income MINUS (d) any Capital Improvement Reserve
attributable to such asset for such Determination Period, all as determined in
accordance with GAAP. In the event that a Person has a Minority Interest in any
other Person, then the Operating Cash Flow of such Person shall include, without
duplication, the allocable share of the Operating Cash Flow of such other
Person, based on the ownership interest of such Person in such other Person.
OPERATING EXPENSES. Operating Expenses shall mean with respect
to a Mortgaged Property during any Determination Period, the sum of the
following:
(a) all taxes and assessments imposed upon such Mortgaged
Property actually paid by or on behalf of the Borrower, REA or a
Guarantor during such Determination Period;
(b) the amounts paid by or on behalf of the Borrower, REA or a
Guarantor during such Determination Period on account of insurance
premiums for insurance carried in connection with such Mortgaged
Property or the ownership and operation thereof, and deductible amounts
expended during such
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Determination Period by the Borrower, REA or a Guarantor and not
reimbursed under any such insurance;
(c) expenses paid by or on behalf of the Borrower, REA or a
Guarantor during such Determination Period for the operation, cleaning,
marketing, leasing, maintenance, repair and replacement of such
Mortgaged Property properly chargeable against income according to
GAAP; and
(d) an amount approved by the Agent and actually funded as a
reasonable reserve for expenses relating to such Mortgaged Property by
the Borrower, REA or a Guarantor, which are not payable on a regular
basis during such Determination Period (including, but not limited to,
taxes and insurance), but excluding any amounts paid from funded
reserves.
For the purposes of this Agreement, Operating Expenses shall
not include any of the following:
(i) foreign, U.S., state, and local income taxes, franchise
taxes or other taxes based on income imposed on the Borrower, REA or
any Guarantor generally and not as owner of a Mortgaged Property;
(ii) depreciation and any other non-cash expenditures of the
Borrower, REA or any Guarantor for income tax purposes;
(iii) the cost of any improvements to a Mortgaged Property of
a capital nature (as determined in accordance with GAAP);
(iv) any expense paid in connection with the sale of all or
any part of a Mortgaged Property or any interest therein;
(v) any costs, expenses, fees, commissions or other
compensation paid by or on behalf of the Borrower, REA or any Guarantor
in connection with the renovation, improvement or development of a
Mortgaged Property except as provided in clause (c) of this definition;
and
(vi) any payment of principal or interest under the Notes or
other fees or charges payable under this Agreement or the other Loan
Documents.
Operating Expenses shall be determined on the basis of sound
cash basis accounting practices applied on a consistent basis, modified as
described above.
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OUTSTANDING. With respect to the Loans, the aggregate unpaid
principal thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by
Section 4002 of ERISA and any successor entity or entities having similar
responsibilities.
PERMITTED LIENS. Liens, security interests and other
encumbrances permitted by Section 8.2.
PERSON. Any individual, corporation, limited liability
company, partnership, trust, unincorporated association, business, or other
legal entity, and any government or any governmental agency or political
subdivision thereof.
PERSONAL PROPERTY. All fixtures, machinery, equipment,
furniture, furnishings, inventory, building supplies, appliances and other
articles of personal property, including, but not limited to, all vehicles,
books, gas and electric fixtures, radiators, heaters, furnaces, engines and
machinery, boilers, ranges, ovens, elevators and motors, bathtubs, sinks,
commodes, basins, pipes, faucets and other plumbing, heating and air
conditioning equipment, mirrors, refrigerating plant, refrigerators, iceboxes,
dishwashers, carpeting, floor coverings, furniture, light fixtures, signs, lawn
equipment, water heaters, and cooking apparatus and appurtenances, and all other
fixtures and equipment now or hereafter owned by the Borrower, REA or any
Guarantor and located in, on or about, and used or intended to be used primarily
with or in connection with the use, operation, or enjoyment of, any Mortgaged
Property, whether installed in such a way as to become a part thereof or not,
including all extensions, additions, improvements, betterments, renewals and
replacements of any of the foregoing and all the right, title and interest of
the Borrower, REA or any Guarantor in and to any of the foregoing now owned or
hereafter acquired by the Borrower, REA or any Guarantor.
POTENTIAL COLLATERAL. Any property of the Borrower, REA or a
Guarantor which is not at the time included in the Collateral and which consists
of (i) Eligible Real Estate, or (ii) Real Estate which is capable of becoming
Eligible Real Estate through the approval of the Majority Lenders and the
completion and delivery of Eligible Real Estate Qualification Documents.
PROJECT APPROVALS. See Section 6.24(f).
REA. As defined in the preamble hereto.
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REAL ESTATE. All real property at any time owned or leased (as
lessee or sublessee) by the Borrower, REA, any Guarantor or any of their
respective Subsidiaries, including, without limitation, the Mortgaged
Properties.
RECORD. The grid attached to any Note, or the continuation of
such grid, or any other similar record, including computer records, maintained
by any Lender with respect to any Loan referred to in such Note.
REFERENCE BANK. The Agent.
REGISTER. See Section 18.2.
REIT STATUS. With respect to REA, its status as a real estate
investment trust as defined in Section 856(a) of the CoDE.
RELEASE. See Section 6.20(c)(iii).
RENT ROLL. A report prepared by the Borrower, REA or a
Guarantor showing for each Mortgaged Property owned or leased by it, its
occupancy, lease expiration dates, lease rent and other information in
substantially the form presented to the Lenders prior to the date hereof or in
such other form as may have been approved by the Agent.
REQUIREMENTS. See Section 6.24(e).
SECURITY DOCUMENTS. The Mortgages, the Assignments of Leases
and Rents, the Indemnity Agreements, UCC-1 financing statements and any further
collateral assignments to the Agent for the benefit of the Lenders.
SHORT-TERM INVESTMENTS. Investments described in subsections
(a) through (g), inclusive, of Section 8.3. For all purposes of this Agreement
and the other Loan Documents, the value of Short-term Investments at any time
shall be the current market value thereof determined in a manner reasonably
satisfactory to the Agent.
STATE. A state of the United States of America.
SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT. An
agreement among the Agent, the Borrower, REA or a Guarantor and a tenant under a
Lease pursuant to which such tenant agrees to subordinate its rights under the
Lease to the lien or security title of
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the applicable Mortgage and agrees to recognize the Agent or its successor in
interest as landlord under the Lease in the event of a foreclosure under such
Mortgage, and the Agent agrees to not disturb the possession of such tenant,
such agreement to be substantially in the form of EXHIBIT E annexed hereto.
SUBSIDIARY. Any corporation, association, partnership, trust,
or other business entity of which the designated parent shall at any time own
directly or indirectly through a Subsidiary or Subsidiaries greater than fifty
percent (50%) (by number of votes or controlling interests) of the outstanding
voting interests or other economic interest, or any other entity the accounts of
which are consolidated with the parent.
SURVEY. An instrument survey of each parcel of Mortgaged
Property prepared by a registered land surveyor which shall show the location of
all buildings, structures, easements and utility lines on such property, shall
be sufficient to remove the standard survey exception from the Title Policy,
shall show that all buildings and structures are within the lot lines of the
Mortgaged Property and shall not show any encroachments by others (or to the
extent any encroachments are shown, such encroachments shall be acceptable to
the Agent in its sole discretion), shall show rights of way, adjoining sites,
establish building lines and street lines, the distance to and names of the
nearest intersecting streets and such other details as the Agent may reasonably
require; and shall show whether or not the Mortgaged Property is located in a
flood hazard district as established by the Federal Emergency Management Agency
or any successor agency or is located in any flood plain, flood hazard or
wetland protection district established under federal, state or local law and
shall otherwise be in form and substance reasonably satisfactory to the Agent.
SURVEYOR CERTIFICATION. With respect to each parcel of
Mortgaged Property, a certificate executed by the surveyor who prepared the
Survey with respect thereto, dated as of a recent date and containing such
information relating to such parcel as the Agent or the Title Insurance Company
may reasonably require, such certificate to be reasonably satisfactory to the
Agent in form and substance.
TAKING. The taking or appropriation (including by deed in lieu
of condemnation) of any Mortgaged Property, or any part thereof or interest
therein, for public or quasi-public use under the power of eminent domain, by
reason of any public improvement or condemnation proceeding, or in any other
manner or any damage or injury or diminution in value through condemnation,
inverse condemnation or other exercise of the power of eminent domain.
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TANGIBLE NET WORTH. With respect to any Person, the amount by
which the Total Assets of such Person exceeds the Total Liabilities of such
Person, LESS the sum of:
(a) the total book value of all assets of such Person properly
classified as intangible assets under GAAP, including such items as
good will, the purchase price of acquired assets in excess of the fair
market value thereof, trademarks, trade names, service marks, brand
names, copyrights, patents and licenses, and rights with respect to the
foregoing; PLUS
(b) all amounts representing any write-up in the book value of
any assets of such Person resulting from a revaluation thereof
subsequent to the Balance Sheet Date.
TITLE INSURANCE COMPANY. First American Title Insurance
Company, Stewart Title Insurance Company and/or any other title insurance
company or companies approved by the Agent and the Borrower.
TITLE POLICY. With respect to each parcel of Mortgaged
Property, an ALTA standard form title insurance policy (or, if such form is not
available, an equivalent, legally promulgated form of mortgagee title insurance
policy reasonably acceptable to the Agent) issued by a Title Insurance Company
(with such reinsurance as the Agent may reasonably require, any such reinsurance
to be with direct access endorsements to the extent available under applicable
law) in an amount as the Agent may reasonably require (but in no event exceeding
the Appraised Value of such Mortgaged Property) insuring the priority of the
Mortgage thereon and that the Borrower, REA or a Guarantor holds marketable fee
simple title to or a valid and subsisting leasehold interest in such parcel,
subject only to the encumbrances permitted by the Mortgage and which shall not
contain standard exceptions for mechanics liens, persons in occupancy (other
than tenants as tenants only under Leases) or matters which would be shown by a
survey, shall not insure over any matter except to the extent that any such
affirmative insurance is acceptable to the Agent in its sole discretion, and
shall contain (a) a revolving credit endorsement and (b) such other endorsements
and affirmative insurance as the Agent may reasonably require and is available
in the State in which the Real Estate is located, including but not limited to
(i) a comprehensive endorsement, (ii) a variable rate of interest endorsement,
(iii) a usury endorsement (if the Lenders have not received a satisfactory
opinion regarding usury from counsel satisfactory to the Lenders), (iv) a doing
business endorsement, (v) an ALTA form 3.1 zoning endorsement (in States where
same is available from the Title Insurance Company without an opinion of counsel
concerning such matters and where other evidence of zoning compliance has not
been delivered to the Agent in the Agent's good faith business judgment), (vi) a
"tie-in"
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endorsement relating to all Title Policies issued by such Title Insurance
Company in respect of other Mortgaged Property and (vii) a "first loss"
endorsement.
TOTAL ASSETS. With respect to any Person, all assets of such
Person determined in accordance with GAAP. All real estate assets shall be
valued on an undepreciated cost basis. In the event that a Person has a Minority
Interest in any other Person, then the Total Assets of such Person shall
include, without duplication, the allocable share of the Total Assets of such
other Person, based on the ownership interest of such Person in such other
Person.
TOTAL COMMITMENT. The sum of the Commitments of the Lenders,
as in effect from time to time. On the Closing Date, the Total Commitment shall
be $150,000,000 with such amount comprising the Tranche A Commitment, provided
that the Total Commitment shall increase up to a maximum of $250,000,000 if, as
and when Tranche B is activated as provided in Section 2.9; provided the face
amount of the Notes shall equal $250,000,000 as of the Closing Date without
increasing the Total Commitment as provided in Section 2.4.
TOTAL LIABILITIES. With respect to any Person, all liabilities
of such Person determined in accordance with GAAP and, without duplication, all
Indebtedness of such Person, whether or not so classified. In the event that a
Person has a Minority Interest in any other Person, then the Total Liabilities
of such Person shall include, without duplication, the allocable share of the
Total Liabilities of such other Person, based on the ownership interest of such
Person in such other Person.
TRANCHE A. See Section 2.9.
TRANCHE B. See Section 2.9.
TYPE. As to any Loan, its nature as a Base Rate Loan or a
Eurodollar Rate Loan.
UNDER DEVELOPMENT. Any Real Estate shall be considered Under
Development until such time as (a) a certificate of occupancy (or, to the extent
a certificate of occupancy is not available in the jurisdiction in which such
Real Estate is located, an equivalent certificate or other evidence satisfactory
to the Agent) has been obtained, and (b) the Gross Cash Receipts from the
operation of such Real Estate shall have been not less than the Operating
Expenses of such Real Estate for three (3) consecutive months (including a
reserve (in an amount reasonably satisfactory to the Agent) for any expenses not
payable during such period, such as taxes and insurance).
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YEAR 2000 COMPLIANT. All computers, hardware, imbedded
microchips, software and material date-affected technology used in and material
to Borrower's business operations (collectively, "Information Technology") are
able to correctly and effectively store, process and otherwise deal with date
data from, into, between and otherwise concerning the twentieth and twenty-first
centuries, and otherwise continue to function properly and unimpaired with
respect to all calendar dates falling on or after January 1, 2000.
Section 1.2 RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification of such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by GAAP applied on a consistent basis by the
accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) The words "approval" and "approved", as the context
requires, means an approval in writing given to the party seeking approval after
full and fair disclosure to the party giving approval of all material facts
necessary in order to determine whether approval should be granted.
(h) All terms not specifically defined herein or by GAAP,
which terms are defined in the Uniform Commercial Code as in effect in the State
of New York, have the meanings assigned to them therein.
(i) Reference to a particular "Section ", refers to that
section of this Agreement unless otherwise indicated.
(j) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.
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Section 2 THE REVOLVING CREDIT FACILITY.
Section 2.1 COMMITMENT TO LEND. Subject to the terms and conditions set
forth in this Agreement, each of the Lenders severally agrees to lend to the
Borrower, and the Borrower may borrow (and repay and reborrow) from time to time
between the Closing Date and the Maturity Date upon notice by the Borrower to
the Agent given in accordance with Section 2.6, such sums as are requested by
the Borrower for the purposes set forth in Section 2.8 up to a maximum aggregate
principal amount outstanding (after giving effect to all amounts requested) at
any one time equal to the lesser of (a) such Lender's Commitment and (b) such
Lender's Commitment Percentage of the Borrowing Base; PROVIDED, that, in all
events no Default or Event of Default shall have occurred and be continuing; and
PROVIDED, FURTHER, that the outstanding principal amount of the Loans (after
giving effect to all amounts requested) shall not at any time exceed the Total
Commitment or cause a violation of the covenant set forth in Section 9.1. The
Loans shall be made PRO RATA in accordance with each Lender's Commitment
Percentage. Each request for a Loan hereunder shall constitute a representation
and warranty by the Borrower that all of the conditions set forth in Section 10
and Section 11 have been satisfied on the date of such request. Notwithstanding
anything herein to the contrary, the Lenders shall have no obligation to make
Loans to the Borrower in the maximum aggregate principle amount of more than
$150,000,000.00, provided that the Commitment shall be increased up to a maximum
amount of $250,000,000.00 if, as and when Tranche B is activated as provided in
Section 2.9.
Section 2.2 FACILITY FEE. The Borrower agrees to pay to the Agent for
the account of the Lenders in accordance with their respective Commitment
Percentages a facility fee calculated at the rate per annum as set forth below
on the average daily amount by which the Total Commitment exceeds the
outstanding principal amount of Loans during each calendar quarter or portion
thereof commencing on the date hereof and ending on the Maturity Date. The
Facility Fee shall be calculated based on the ratio (expressed as a percentage)
of (a) the average daily amount of the outstanding principal amount of the Loans
during such quarter to (b) the Total Commitment as follows:
<TABLE>
<CAPTION>
Ratio of Outstanding Principal
Balance to Total Commitment Rate
--------------------------- ----
<S> <C>
50% or less .375%
Greater than 50% .25%
</TABLE>
The facility fee shall be payable quarterly in arrears on the first day of each
calendar quarter for the immediately preceding calendar quarter or portion
thereof, on any earlier date on which the applicable Commitments shall be
reduced and on the Maturity Date. For purposes of this Section 2.2, the Total
Commitment shall only include Tranche A until such time if, as and when all or
any
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portion of Tranche B is activated as provided in Section 2.9, whereupon the
Total Commitment shall include Tranche A and such portion of Tranche B as is so
activated.
Section 2.3 REDUCTION AND TERMINATION OF COMMITMENTS. The Borrower
shall have the right at any time and from time to time upon five (5) Business
Days' prior written notice to the Agent to reduce by $5,000,000 or an integral
multiple of $1,000,000 in excess thereof (provided that in no event shall the
Total Commitment be reduced in such manner to an amount less than $80,000,000)
or to terminate entirely the unborrowed portion of the Commitments, whereupon
the Commitments of the Banks shall be reduced PRO RATA in accordance with their
respective Commitment Percentages of the amount specified in such notice or, as
the case may be, terminated, any such termination or reduction to be without
penalty except as otherwise set forth in Section 4.8; provided, however, that no
such termination or reduction shall be permitted if, after giving effect
thereto, the Outstanding Loans would exceed the Commitments of the Lenders as so
terminated or reduced. Promptly after receiving any notice from the Borrower
delivered pursuant to this Section 2.3, the Agent will notify the Lenders of the
substance thereof. Upon the effective date of any such reduction or termination,
the Borrower shall pay to the Agent for the respective accounts of the Lenders
the full amount of any facility fee under Section 2.2 then accrued on the amount
of the reduction. No reduction or termination of the Commitment may be
reinstated.
Section 2.4 NOTES. The Loans shall be evidenced by separate promissory
notes of the Borrower in substantially the form of EXHIBIT F hereto
(collectively, the "Notes"), dated the Closing Date (except as otherwise
provided in Section 18.3) and completed with appropriate insertions. One Note
shall be payable to the order of each Lender in the principal amount equal to
such Lender's Commitment or, if less, the outstanding amount of all Loans made
by such Lender, plus interest accrued thereon, as set forth below (provided
that, without increasing the Commitment of BankBoston, the initial Note
delivered to BankBoston shall be in the principal amount equal to the sum of
BankBoston's active Tranche A Commitment and the inactive Tranche B Commitment).
The Borrower irrevocably authorizes each Lender to make or cause to be made, at
or about the time of the Drawdown Date of any Loan or the time of receipt of any
payment of principal thereof, an appropriate notation on such Lender's Record
reflecting the making of such Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Loans set forth on such Lender's Record
shall be PRIMA FACIE evidence of the principal amount thereof owing and unpaid
to such Lender, but the failure to record, or any error in so recording, any
such amount on such Lender's Record shall not limit or otherwise affect the
obligations of the
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Borrower hereunder or under any Note to make payments of principal of or
interest on any Note when due. The face amount of BankBoston's Note includes
Tranche B, which as of the date hereof is not available to be borrowed by the
Borrower. By delivery of the Notes, there shall not be deemed to have occurred,
and there has not otherwise occurred, any payment, satisfaction or novation of
the indebtedness evidenced by the "Notes" as defined in the Original Loan
Agreement, which indebtedness is instead allocated among the Lenders as of the
date hereof and evidenced by the Notes in accordance with their respective
Commitment Percentages.
Section 2.5 INTEREST ON LOANS.
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the date on which such
Base Rate Loan is repaid or converted to a Eurodollar Rate Loan at the rate per
annum equal to the Base Rate.
(b) Each Eurodollar Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of each
Interest Period with respect thereto at the rate per annum equal to the sum of
the Eurodollar Rate determined for such Interest Period plus one and six hundred
twenty-five thousandths percent (1.625%); provided, however, that commencing on
July 1, 1999 and continuing thereafter, each Eurodollar Loan shall bear interest
at the rate per annum equal to the sum of the Eurodollar Rate determined for
such Interest Period plus the Applicable Margin. Notwithstanding the foregoing,
Borrower agrees that on July 1, 1999 the Applicable Margin shall be 2.00% unless
Borrower provides Agent with evidence that the Applicable Margin ratio shall be
less than 60%.
(c) The Borrower promises to pay interest on each Loan in
arrears (i) on each Interest Payment Date with respect thereto, (ii) upon any
prepayment of the Loans (to the extent accrued on the amount being prepaid to
the date of prepayment) and (iii) at maturity of the Loans. Additionally, after
July 1, 1999, in the event that any additional interest becomes due and payable
for any period with respect to the Loans as a result of a change in the
Applicable Margin, and interest for such period has previously been paid by the
Borrower, the Borrower shall pay to the Agent for the account of the Lenders the
amount of such increase within ten (10) days of demand.
(d) Base Rate Loans and Eurodollar Loans may be converted to
Loans of the other Type as provided in Section 4.1.
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Section 2.6 REQUESTS FOR LOANS. The Borrower shall give to the Agent
written notice in the form of EXHIBIT G hereto (or telephonic notice confirmed
in writing in the form of EXHIBIT G hereto) of each Loan requested hereunder (a
"Loan Request") no less than one (1) Business Day prior to the proposed Drawdown
Date with respect to Base Rate Loans and three (3) Business Days prior to the
proposed Drawdown Date with respect to Eurodollar Rate Loans. Each such notice
shall specify with respect to the requested Loan the proposed principal amount
of such Loan, the Type of Loan, the initial Interest Period (if applicable) for
such Loan and the Drawdown Date. Each such notice shall also contain (i) a
general statement as to the purpose for which such advance shall be used (which
purpose shall be in accordance with the terms of Section 2.8), (ii) a
certification by the chief financIAl officer or chief accounting officer of the
Borrower that the Borrower, REA and the Guarantors are and will be in compliance
with all covenants under the Loan Documents after giving effect to the making of
such Loan, and (iii) a Compliance Certificate prepared using the financial
statements of REA most recently provided or required to be provided to the Agent
under Section 6.4 or Section 7.4 adjusted in the best good faith estimate of the
Borrower to give effect to the proposed advance. Promptly upon receipt of any
such notice, the Agent shall notify each of the Lenders thereof. Except as
provided in this Section 2.6, each such Loan Request shall be irrevocable and
binding on the Borrower and shall obligate the Borrower to accept the Loan
requested from the Lenders on the proposed Drawdown Date; provided that, in
addition to the Borrower's other remedies against any Lender which fails to
advance its proportionate share of a requested Loan, such Loan Request may be
revoked by the Borrower by notice received by the Agent no later than the
Drawdown Date if any Lender fails to advance its proportionate share of the
requested Loan in accordance with the terms of this Agreement; and provided
further that the Borrower shall be liable in accordance with the terms of this
Agreement to any Lender which is prepared to advance its proportionate share of
the requested Loan for any costs, expenses or damages actually incurred by such
Lender as a result of the Borrower's election to revoke such Loan Request.
Nothing herein shall prevent the Borrower from seeking recourse against any
Lender that fails to advance its proportionate share of a requested Loan as
required by this Agreement. Each Loan Request shall be (a) for a Base Rate Loan
in a minimum aggregate amount of $1,000,000 or an integral multiple of $100,000
in excess thereof; or (b) for a Eurodollar Rate Loan in a minimum aggregate
amount of $2,000,000 or an integral multiple of $100,000 in excess thereof;
PROVIDED, HOWEVER, that there shall be no more than eight (8) Eurodollar Rate
Loans outstanding at any one time.
Section 2.7 FUNDS FOR LOANS.
(a) Not later than 2:00 p.m. (Boston time) on the proposed
Drawdown Date of any Loans, each of the Lenders will make available to the
Agent, at the Agent's Head Office, in immediately available funds, the amount of
such Lender's Commitment Percentage of the
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amount of the requested Loans which may be disbursed pursuant to Section 2.1.
Upon receipt from each Lender of such amount, and upon receipt of the documents
required by Section 10 and Section 11 and the satisfaction of the other
conditions set forth therein, to the extent applicable, the Agent will make
available to the Borrower the aggregate amount of such Loans made available to
the Agent by the Lenders by crediting such amount to the account of the Borrower
maintained at the Agent's Head Office. The failure or refusal of any Lender to
make available to the Agent at the aforesaid time and place on any Drawdown Date
the amount of its Commitment Percentage of the requested Loans shall not relieve
any other Lender from its several obligation hereunder to make available to the
Agent the amount of such other Lender's Commitment Percentage of any requested
Loans, including any additional Loans that may be requested subject to the terms
and conditions hereof to provide funds to replace those not advanced by the
Lender so failing or refusing. In the event of any such failure or refusal, the
Lenders not so failing or refusing shall be entitled to a priority secured
position as against the Lender or Lenders so failing or refusing to make
available to the Borrower the amount of its or their Commitment Percentage for
such Loans as provided in Section 12.4.
(b) Unless the Agent shall have been notified by any Lender
prior to the applicable Drawdown Date that such Lender will not make available
to Agent such Lender's pro rata share of a proposed Loan, the Agent may in its
discretion assume that such Lender has made such Loan available to Agent in
accordance with the provisions of this Agreement and the Agent may, if it
chooses, in reliance upon such assumption make such Loan available to the
Borrower, and such Lender shall be liable to the Agent for the amount of such
advance.
Section 2.8 USE OF PROCEEDS. The Borrower will use the proceeds of the
Loans solely to provide financing (a) for the acquisition by the Borrower
pursuant to the terms thereof fee interests or leasehold interests in Real
Estate which (except as otherwise agreed by the Majority Lenders as referred to
in clause (c) of the definition of Eligible Real Estate) is utilized for office
and/or industrial purposes, (b) for Capital Improvement Projects for Real
Estate; (c) for working capital purposes (provided that the aggregate amount of
Loans outstanding for working capital purposes shall not at any one time exceed
$25,000,000), and (d) for such other purposes as the Majority Lenders in their
sole discretion from time to time may agree in writing.
Section 2.9 LOAN TRANCHES.
(a) The Loan consists of two components:
(i) A tranche of $150,000,000.00 which is available
to be disbursed to the Borrower subject to the terms of this Agreement
(hereinafter referred to as "Tranche A"); and
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(ii) A tranche of up to $100,000,000 which is not a
part of the Commitment or Total Commitment (including, without
limitation, for the purposes of determining the Majority Banks) and
which is not available to be borrowed by the Borrower until the
satisfaction of the following conditions (hereinafter referred to as
"Tranche B").
(b) Provided that no Default or Event of Default shall occur
and be continuing, the Borrower may by giving written notice to the Agent,
subject to the terms and conditions set forth in this Agreement, request that
Lenders activate Tranche B (a "Tranche B Request"). The Agent shall promptly
provide a copy of such notice to each of the Lenders. The Lenders shall notify
the Agent within thirty (30) days of receipt of such notice from the Agent of
such Lender's approval or rejection of the Tranche B Request. No Tranche B
Request shall be deemed approved unless approved by all of the Lenders, which
approval may be granted or withheld in each Lender's sole and absolute
discretion. In the event that a Lender shall fail to respond in writing to Agent
within such thirty (30) day period, such Lender shall be deemed to have rejected
the Tranche B request. The Agent shall promptly notify the Borrower of the
responses received from the Lenders with respect to the Tranche B Request. The
Borrower acknowledges and agrees that the Lenders have no agreement or
obligation to approve a Tranche B Request at any time. The request by the
Borrower for activation of Tranche B shall constitute a representation and
warranty by the Borrower that all the conditions set forth in this Section shall
have been satisfied on the date of such request.
(c) In the event that the Tranche B Request is approved as
provided above, such approval shall be conditioned upon satisfaction of the
following conditions precedent which must be satisfied prior to the
effectiveness of any activation of Tranche B:
(i) PAYMENT OF ACTIVATION FEE. The Borrower shall pay
to the Agent such fees as Agent and the Lenders may require to activate
Tranche B, which fees shall, when paid, be fully earned and
non-refundable under any circumstances. The Agent shall pay to the
Lenders certain fees pursuant to their separate agreement; and
(ii) NO DEFAULT. On the date such Tranche B Notice is
given, there shall exist no Default or Event of Default; and
(iii) REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the Borrower or the Guarantors
in the Loan Documents or otherwise made by or on behalf of the
Borrower, the Guarantors or any of their respective Subsidiaries in
connection therewith or after the date thereof shall have been true and
correct in all material respects, when made and shall also be true and
correct in all material respects on the date of such Tranche B Notice,
other than for changes in the ordinary course of business permitted by
this Agreement that have not had any material
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adverse effect on the business of the Borrower, the Guarantors or any
of their respective Subsidiaries; and
(iv) ADDITIONAL DOCUMENTS AND FEES. The Borrower
shall pay to the Agent for the account of the Lenders in accordance
with their separate agreement such additional fees as may be required
as a condition to the approval of the Tranche B Request. The Borrower
shall also execute and deliver to Agent and the Lenders such additional
documents, instruments, certifications and opinions as the Agent may
require, require in its sole and absolute discretion; and
(v) ASSIGNMENTS. One or more Lenders or potential
assignees shall have agreed to acquire the portion of Tranche B that Borrower
desires to activate.
(d) Upon satisfaction of the terms and conditions set forth
above, such requested amount shall become a part of the Commitment and Total
Commitment and be available to be disbursed subject to the terms of this
Agreement.
Section 3 REPAYMENT OF THE LOANS.
Section 3.1 STATED MATURITY. The Borrower promises to pay on the
Maturity Date and there shall become absolutely due and payable on the Maturity
Date all of the Loans outstanding on such date, together with any and all
accrued and unpaid interest thereon.
Section 3.2 MANDATORY PREPAYMENTS. If at any time the aggregate
outstanding principal amount of the Loans exceeds the aggregate Commitments or
the Borrowing Base for the Loans, then the Borrower shall immediately pay the
amount of such excess to the Agent for the respective accounts of the Lenders
for application to such Loans. In the event there shall have occurred a casualty
with respect to any Mortgaged Property and the Borrower is required to repay the
Loans pursuant to Section 7.7 or a Taking and the Borrower is required to repay
the Loans pursuant to a Mortgage, the Borrower shall prepay the Loans
concurrently with the date of receipt by the Borrower or the Agent of any
Insurance Proceeds or Condemnation Proceeds in respect of such casualty or
Taking, as applicable, or as soon thereafter as is reasonably practicable, in
the amount required pursuant to the relevant provisions of Section 7.7 or such
Mortgage.
Section 3.3 OPTIONAL PREPAYMENTS. The Borrower shall have the right, at
its election, to prepay the outstanding amount of the Loans, as a whole or in
part, at any time without penalty or premium; PROVIDED, that the full or partial
prepayment of the outstanding amount of any
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Eurodollar Rate Loans pursuant to this Section 3.3 may be made only on the last
day of the Interest Period relating thereto except as otherwise required
pursuant to Section 4.7. The Borrower shall give the Agent, no later than 10:00
a.m., Boston time, at least five (5) days prior written notice of any prepayment
pursuant to this Section 3.3, in each case specifying the proposed date of
prepayment of Loans and the principal amount to be prepaid.
Section 3.4 PARTIAL PREPAYMENTS. Each partial prepayment of the Loans
under Section 3.3 shall be in a minimum amount of $1,000,000.00 or an integral
multiple of $100,000 in excess thereof, shall be accompanied by the payment of
accrued interest on the principal prepaid to the date of payment and shall be
applied, in the absence of instruction by the Borrower, first to the principal
of Base Rate Loans and then to the principal of Eurodollar Rate Loans.
Section 3.5 EFFECT OF PREPAYMENTS. Amounts of the Loans prepaid under
Section 3.2 and Section 3.3 prior to the Maturity Date may be reborrowed as
provided in Section 2.
Section 3.6 ADDITIONAL PAYMENTS. Each voluntary or mandatory prepayment
of the Loans pursuant to this Article shall be accompanied by the payment of (i)
accrued interest on the principal amount so prepaid to the date of prepayment,
and (ii) the amount, if any, required to be paid to the Lenders pursuant to
Section 4.8.
Section 4 CERTAIN GENERAL PROVISIONS.
Section 4.1 CONVERSION OPTIONS.
(a) The Borrower may elect from time to time to convert any of
its outstanding Loans to a Loan of another Type and such Loan shall thereafter
bear interest as a Base Rate Loan or a Eurodollar Rate Loan, as applicable;
PROVIDED that (i) with respect to any such conversion of a Eurodollar Rate Loan
to a Base Rate Loan, the Borrower shall give the Agent at least one (1) Business
Day's prior written notice of such election, and such conversion shall only be
made on the last day of the Interest Period with respect to such Eurodollar Rate
Loan; (ii) with respect to any such conversion of a Base Rate Loan to a
Eurodollar Rate Loan, the Borrower shall give the Agent at least three (3)
Eurodollar Business Days' prior written notice of such election and the Interest
Period requested for such Loan, the principal amount of the Loan so converted
shall be in a minimum aggregate amount of $2,000,000 or an integral multiple of
$100,000 in excess thereof and, after giving effect to the making of such Loan,
there shall be no more than eight (8) Eurodollar Rate Loans outstanding at any
one time; and (iii) no Loan may be converted into a Eurodollar Rate Loan when
any Default or Event of Default has occurred and is continuing. All or any part
of the outstanding Loans of any Type may be converted as provided herein,
PROVIDED that no partial conversion shall result in a Base Rate Loan in a
principal amount of less than $1,000,000 or a Eurodollar Rate Loan in a
principal amount of less than $2,000,000 and that the principal amount of each
Loan shall be in an integral multiple of $100,000. On the date on
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which such conversion is being made, each Lender shall take such action as is
necessary to transfer its Commitment Percentage of such Loans to its Domestic
Lending Office or its Eurodollar Lending Office, as the case may be. Each
Conversion/Continuation Request relating to the conversion of a Base Rate Loan
to a Eurodollar Rate Loan shall be irrevocable by the Borrower.
(b) Any Eurodollar Rate Loan may be continued as such Type
upon the expiration of an Interest Period with respect thereto by compliance by
the Borrower with the terms of Section 4.1; PROVIDED that no Eurodollar Rate
Loan may be continued as such when any Default or Event of Default has occurred
and is continuing, but shall be automatically converted to a Base Rate Loan on
the last day of the Interest Period relating thereto ending during the
continuance of any Default or Event of Default.
(c) In the event that the Borrower does not notify the Agent
of its election hereunder with respect to any Eurodollar Rate Loan, such Loan
shall be automatically converted to a Base Rate Loan at the end of the
applicable Interest Period.
Section 4.2 COMMITMENT FEE. The Borrower agrees to pay to BankBoston a
commitment fee for services rendered or to be rendered in connection with the
Loans as provided pursuant to an Agreement Regarding Fees dated as of even date
herewith among the Borrower, REA, and BankBoston. Such commitment fee shall be
solely for the account of BankBoston as provided in such Agreement Regarding
Fees. BankBoston shall pay on the Closing Date to the other Lenders a closing
fee in accordance with their separate agreement.
Section 4.3 AGENT'S FEE. The Borrower shall pay to the Agent, for the
Agent's own account, an annual Agent's fee as provided in the Agreement
Regarding Fees. The Agent's fee shall be payable quarterly in arrears on the
first day of each calendar quarter for the immediately preceding calendar
quarter or portion thereof. The Agent's fee shall also be paid upon the Maturity
Date or earlier termination of the Commitments. The Agent's fee for any partial
quarter shall be prorated.
Section 4.4 FUNDS FOR PAYMENTS.
(a) All payments of principal, interest, facility fees,
closing fees and any other amounts due hereunder or under any of the other Loan
Documents shall be made to the Agent, for the respective accounts of the Lenders
and the Agent, as the case may be, at the Agent's Head Office, not later than
1:00 p.m. (Boston time) on the day when due, in each case in immediately
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available funds. The Agent is hereby authorized to charge the accounts of the
Borrower with BankBoston, on the dates when the amount thereof shall become due
and payable, with the amounts of the principal of and interest on the Loans and
all fees, charges, expenses and other amounts owing to the Agent and/or the
Lenders under the Loan Documents.
(b) All payments by the Borrower hereunder and under any of
the other Loan Documents shall be made without setoff or counterclaim and free
and clear of and without deduction for any taxes (other than income or franchise
taxes imposed on any Lender), levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless the Borrower is
compelled by law to make such deduction or withholding; PROVIDED that no such
payment shall constitute a waiver of any rights that the Borrower may have
hereunder. If any such obligation is imposed upon the Borrower with respect to
any amount payable by it hereunder or under any of the other Loan Documents, the
Borrower will pay to the Agent, for the account of the Lenders or (as the case
may be) the Agent, on the date on which such amount is due and payable hereunder
or under such other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Lenders or the Agent to receive the same net amount
which the Lenders or the Agent would have received on such due date had no such
obligation been imposed upon the Borrower. The Borrower will deliver promptly to
the Agent certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Borrower hereunder or
under any other Loan Document.
(c) Each Lender organized under the laws of a jurisdiction
outside the United States, if requested in writing by the Borrower (but only so
long as such Lender remains lawfully able to do so), shall provide the Borrower
with such duly executed form(s) or statement(s) which may, from time to time, be
prescribed by law and, which, pursuant to applicable provisions of (i) an income
tax treaty between the United States and the country of residence of such
Lender, (ii) the Code, or (iii) any applicable rules or regulations in effect
under (i) or (ii) above, indicates the withholding status of such Lender;
provided that nothing herein (including without limitation the failure or
inability to provide such form or statement) shall relieve the Borrower of its
obligations under Section 4.4(b). In the event that the Borrower shall have
delivered the certificates or vouchers described above for any payments made by
the Borrower and such Lender receives a refund of any taxes paid by the Borrower
pursuant to Section 4.4(b), such Lender will pay to the Borrower the amount of
such refund promptly upon receipt thereof; PROVIDED that if at any time
thereafter such Lender is required to return such refund, the Borrower shall
promptly repay to such Lender the amount of such refund.
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Section 4.5 COMPUTATIONS. All computations of interest on the Loans and
of other fees to the extent applicable shall be based on a 360-day year and paid
for the actual number of days elapsed. Except as otherwise provided in the
definition of the term "Interest Period" with respect to Eurodollar Rate Loans,
whenever a payment hereunder or under any of the other Loan Documents becomes
due on a day that is not a Business Day, the due date for such payment shall be
extended to the next succeeding Business Day, and interest shall accrue during
such extension.
Section 4.6 INABILITY TO DETERMINE EURODOLLAR RATE. In the event that,
prior to the commencement of any Interest Period relating to any Eurodollar Rate
Loan, the Agent shall determine that adequate and reasonable methods do not
exist for ascertaining the Eurodollar Rate for such Interest Period, the Agent
shall forthwith give notice of such determination (which shall be conclusive and
binding on the Borrower and the Lenders absent manifest error) to the Borrower
and the Lenders. In such event (a) any Loan Request with respect to a Eurodollar
Rate Loan shall be automatically withdrawn and shall be deemed a request for a
Base Rate Loan and (b) each Eurodollar Rate Loan will automatically, on the last
day of the then current Interest Period applicable thereto, become a Base Rate
Loan, and the obligations of the Lenders to make Eurodollar Rate Loans shall be
suspended until the Agent determines that the circumstances giving rise to such
suspension no longer exist, whereupon the Agent shall so notify the Borrower and
the Lenders.
Section 4.7 ILLEGALITY. Notwithstanding any other provisions herein, if
any present or future law, regulation, treaty or directive or the interpretation
or application thereof shall make it unlawful, or any central bank or other
governmental authority having jurisdiction over a Lender or its Eurodollar
Lending Office shall assert that it is unlawful, for any Lender to make or
maintain Eurodollar Rate Loans, such Lender shall forthwith give notice of such
circumstances to the Agent and the Borrower and thereupon (a) the commitment of
the Lenders to make Eurodollar Rate Loans shall forthwith be suspended and (b)
the Eurodollar Rate Loans then outstanding shall be converted automatically to
Base Rate Loans on the last day of each Interest Period applicable to such
Eurodollar Rate Loans or within such earlier period as may be required by law.
Notwithstanding the foregoing, before giving such notice, the applicable Lender
shall designate a different lending office if such designation will void the
need for giving such notice and will not, in the judgment of such Lender, be
otherwise materially disadvantageous to such Lender.
Section 4.8 COMPENSATION. The Borrower shall compensate the Lenders,
upon the Agent's written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expenses and
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liabilities (incurred by reason of the liquidation or reemployment of deposits
or other funds required by the Lenders to fund Loans but excluding any loss of
anticipated profit with respect to such Loans) which the Lenders may sustain:
(i) if for any reason (other than a default by the Lenders) a borrowing of a
Loan does not occur on a date specified therefor in a notice of such borrowing
received from the Borrower (whether or not withdrawn by the Borrower or deemed
withdrawn pursuant to Section 4.6); (ii) if any repayment or prepayment of a
Eurodollar Rate Loan occurs on a date which is not the last day of an Interest
Period applicable thereto; (iii) if any prepayment of any Loan is not made on
any date specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of (x) any other Default by the Borrower to repay Loans when
required by the terms of this Agreement or (y) an election made pursuant to
Section 4.1.
Section 4.9 ADDITIONAL COSTS, ETC. Notwithstanding anything herein to
the contrary, if any present or future applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other regulatory body
or official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Lender or the Agent by any
central bank or other fiscal, monetary or other authority (whether or not having
the force of law), shall:
(a) subject any Lender or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect
to this Agreement, the other Loan Documents, such Lender's Commitment
or the Loans (other than taxes based upon or measured by the income or
profits of such Lender or the Agent or its franchise tax), or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Lender of the
principal of or the interest on any Loans or any other amounts payable
to any Lender under this Agreement or the other Loan Documents, or
(c) impose or increase or render applicable any special
deposit, reserve, assessment, liquidity, capital adequacy or other
similar requirements (whether or not having the force of law and which
are not already reflected in any amounts payable by Borrower hereunder)
against assets held by, or deposits in or for the account of, or loans
by, or commitments of an office of any Lender, or
(d) impose on any Lender or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents,
the Loans, such Lender's Commitment, or any class of loans or
commitments of which any of the Loans or such Lender's Commitment forms
a part;
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and the result of any of the foregoing is:
(i) to increase the cost to any Lender of making,
funding, issuing, renewing, extending or maintaining any of
the Loans or such Lender's Commitment, or
(ii) to reduce the amount of principal, interest or
other amount payable to any Lender or the Agent hereunder on
account of such Lender's Commitment or any of the Loans, or
(iii) to require any Lender or the Agent to make any
payment or to forego any interest or other sum payable
hereunder, the amount of which payment or foregone interest or
other sum is calculated by reference to the gross amount of
any sum receivable or deemed received by such Lender or the
Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, within fifteen (15) days of
demand made by such Lender or (as the case may be) the Agent at any time and
from time to time and as often as the occasion therefor may arise, pay to such
Lender or the Agent such additional amounts as such Lender or the Agent shall
determine in good faith to be sufficient to compensate such Lender or the Agent
for such additional cost, reduction, payment or foregone interest or other sum.
Each Lender and the Agent in determining such amounts may use any reasonable
averaging and attribution methods generally applied by such Lender or the Agent.
Section 4.10 CAPITAL ADEQUACY. If after the date hereof any Lender
determines that (a) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies or
any change in the interpretation or application thereof by any governmental
authority charged with the administration thereof, or (b) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender's or
such holding company's capital as a consequence of such Lender's commitment to
make Loans hereunder to a level below that which such Lender or holding company
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify the Borrower thereof. The Borrower agrees to pay to such
Lender the amount of such reduction in the return on capital as and when
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such reduction is determined, upon presentation by such Lender of a statement of
the amount setting forth the Lender's calculation thereof. In determining such
amount, such Lender may use any reasonable averaging and attribution methods
generally applied by such Lender.
Section 4.11 INTENTIONALLY OMITTED.
Section 4.12 INTEREST ON OVERDUE AMOUNTS; LATE CHARGE. Overdue
principal and (to the extent permitted by applicable law) overdue interest on
the Loans and all other overdue amounts payable hereunder or under any of the
other Loan Documents shall bear interest payable on demand at a rate per annum
equal to four percent (4.0%) above the Base Rate until such amount shall be paid
in full (after as well as before judgment). In addition, the Borrower shall pay
a late charge equal to three percent (3%) of any amount of interest and/or
principal payable on the Loans or any other amounts payable hereunder or under
the Loan Documents, which is not paid by the Borrower within ten (10) days of
the date when due.
Section 4.13 INTENTIONALLY OMITTED.
Section 4.14 CERTIFICATE. A certificate setting forth any amounts
payable pursuant to Section 4.8, Section 4.9, Section 4.10, or Section 4.12 and
a reasonably detailed explanation of such amounts which are due, submitted by
any Lender or the Agent to the Borrower, shall be conclusive in the absence of
manifest error.
Section 4.15 LIMITATION ON INTEREST. Notwithstanding anything in this
Agreement or the other Loan Documents to the contrary, all agreements between or
among the Borrower, REA, the Guarantors, the Lenders and the Agent, whether now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of acceleration of the maturity of any
of the Obligations or otherwise, shall the interest contracted for, charged or
received by the Lenders exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, interest would otherwise be payable
to the Lenders in excess of the maximum lawful amount, the interest payable to
the Lenders shall be reduced to the maximum amount permitted under applicable
law; and if from any circumstance the Lenders shall ever receive anything of
value deemed interest by applicable law in excess of the maximum lawful amount,
an amount equal to any excessive interest shall be applied to the reduction of
the principal balance of the Obligations and to the payment of interest or, if
such excessive interest exceeds the unpaid balance of principal of the
Obligations, such excess shall be refunded to the Borrower. All interest paid or
agreed to be paid to the Lenders shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full period
until payment in full of the principal of the Obligations (including the period
of any renewal or extension thereof) so that the interest thereon for such full
period shall not exceed the maximum amount permitted by applicable law. This
section shall control all agreements between or among the Borrower, REA, the
Guarantors, the Lenders and the Agent.
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Section 5 COLLATERAL SECURITY.
Section 5.1 COLLATERAL. The Obligations shall be secured by (i) a
perfected first priority lien to be held by the Agent for the benefit of the
Lenders on the Mortgaged Properties, pursuant to the terms of the Mortgages,
(ii) a perfected first priority security interest to be held by the Agent for
the benefit of the Lenders in the Leases pursuant to the terms of the
Assignments of Leases and Rents and (iii) the Indemnity Agreements and the other
Security Documents.
Section 5.2 APPRAISALS.
(a) The Agent on behalf of the Lenders shall require
Appraisals of each of the Mortgaged Properties, which will be ordered by the
Agent and reviewed and approved by the appraisal department of the Agent from
time to time, in order to determine the current Appraised Value and Borrowing
Base of each Mortgaged Property, and the Borrower shall pay to the Agent on
demand all reasonable out-of-pocket costs of all such Appraisals relating to the
Mortgaged Properties (which costs shall include any reasonable internal
appraisal review fees of the Agent); PROVIDED, HOWEVER, that so long as no
Default or Event of Default shall have occurred and be continuing and regulatory
requirements of any Lender generally applicable to real estate loans of the
category made under this Agreement as reasonably interpreted by such Lender
shall not require more frequent Appraisals, and except as otherwise provided in
Section 5.2(b) or Section 5.2(e), the Borrower shall not be required to pay for
an Appraisal for a particular Mortgaged Property more often than once in any
twenty-four (24) month period, with the result that, except as otherwise
provided in Section 5.2(b) or Section 5.2(e), the first Appraisal of a Mortgaged
Property for which the Borrower shall be financially responsible shall not be
required prior to the date which is twenty-four (24) months from the date of
initial Appraisal for such Mortgaged Property delivered to the Agent pursuant to
this Agreement.
(b) Notwithstanding the provisions of Section 5.2(a), the
Agent on behalf of the Lenders may, for the purpose of determining the current
Appraised Value and Borrowing Base of a Mortgaged Property, obtain (and the
Borrower shall pay to the Agent on demand all reasonable out-of-pocket costs
(which costs shall include any reasonable internal appraisal review fees of the
Agent) of an Appraisal (or an update of the existing Appraisal) of such
Mortgaged Property (i) at any time that the regulatory requirements of a Lender
generally applicable to real estate loans of the category made under this
Agreement as reasonably interpreted by such Lender shall require an Appraisal,
or (ii) at any time following: (x) a condemnation of or a casualty affecting
more than twenty five percent 25% of the Net Rentable Area of such Mortgaged
Property, (y) the termination or expiration of Leases affecting more than twenty
five percent (25%) of the Net Rentable Area of such Mortgaged Property or (z)
the occurrence of a material adverse change with respect to such Mortgaged
Property as determined by the Majority Lenders in the exercise of
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their good faith business judgment. If an Appraisal (or an update of the
existing Appraisal) is being done in respect of a Mortgaged Property that has
been affected by a condemnation or casualty which is being restored in
accordance with the relevant provisions of Section 7.7 hereof or the Mortgage
encumbering such Mortgaged Property, such Appraisal (or an update of the
existing Appraisal) shall, at the election of the Agent on behalf of the
Lenders, either (A) be undertaken only following the completion of such
restoration or (B) take into account the fact that such restoration has not been
completed and be prepared on an "as-built" basis, based on the plans and
specifications for such restoration; and in either such case any such Appraisal
(or an update of the existing Appraisal) shall take into account any termination
of any Leases that have occurred as a result of such condemnation or casualty.
(c) In the event that the Agent shall advise the Borrower, on
the basis of any Appraisal (or update of an existing Appraisal), that the
Borrowing Base is insufficient to comply with the requirements of Section 9.1,
then until the Borrowing Base is increased or the outstanding principal amount
of the Loans is reduced such that the Borrowing Base is in compliance with
Section 9.1, the Lenders shall not be required to make advances under
Section 2.1.
(d) The Borrower, REA and each Guarantor acknowledge that the
Agent may make changes or adjustments to the value set forth in any Appraisal
(or update of an existing Appraisal) at the time such Appraisal (or update of an
existing Appraisal) is received as may be required by the appraisal department
of the Agent in its good faith business judgment, and that the Lenders are not
bound by the value set forth in any Appraisal performed pursuant to this
Agreement and do not make any representations or warranties with respect to any
such Appraisal. The Borrower, REA and each Guarantor further agree that the
Lenders shall have no liability as a result of or in connection with any
Appraisal (or update of an existing Appraisal) for statements contained in such
Appraisal (or update of an existing Appraisal), including without limitation,
the accuracy and completeness of information, estimates, conclusions and
opinions contained in such Appraisal (or update of an existing Appraisal), or
variance of such Appraisal (or update of an existing Appraisal) from the fair
value of the Mortgaged Property that is the subject of such Appraisal (or update
of an existing Appraisal) given by the local tax assessor's office, or the
Borrower's, REA's or each Guarantor's idea of the value of the Mortgaged
Property.
(e) If requested to do so by the Borrower following the
completion of a Capital Improvement Project at a Mortgaged Property, the Agent
shall obtain, at the sole cost and expense of the Borrower, an Appraisal (or an
update of the existing Appraisal) of such Mortgaged Property, and the Appraised
Value as determined based on such new or updated Appraisal shall be used in
order to determine the Borrowing Base of such Mortgaged Property.
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Section 5.3 REPLACEMENT OR ADDITION OF MORTGAGED PROPERTIES. After the
Closing Date, the Borrower shall have the right, subject to the consent of the
Majority Lenders and the satisfaction by the Borrower of the conditions set
forth in this Section 5.3, to add Potential Collateral to the Collateral or to
replace any Mortgaged Property which is Collateral with Potential Collateral.
Subject to Section 7.17, the Borrower from time to time after the Closing Date
may also request that certain Real Estate of one or more of its wholly-owned
Subsidiaries (collectively, the "Subsidiary Collateral") be included as a
Mortgaged Property for the purpose of increasing the Borrowing Base or replacing
existing Collateral. In the event the Borrower desires to replace Collateral or
add additional Potential Collateral or Subsidiary Collateral as aforesaid, the
Borrower shall provide written notice to the Agent of such request (which the
Agent shall promptly furnish to the Lenders), together with all documentation
and other information required to permit the Agent to determine whether such
Real Estate is Eligible Real Estate. Thereafter, the Agent shall have fifteen
(15) days from the date of the receipt of such documentation and other
information to advise the Borrower whether the Majority Lenders consent to the
acceptance of such Subsidiary Collateral or Potential Collateral.
Notwithstanding the foregoing, no Subsidiary Collateral or Potential Collateral
shall be included as Collateral unless and until the following conditions
precedent shall have been satisfied:
(i) such Subsidiary Collateral or Potential Collateral shall
be Eligible Real Estate;
(ii) the owner or lessee of any Subsidiary Collateral shall
have executed a Guaranty of the Obligations in form and substance
satisfactory to the Agent, or, in the Agent's sole discretion, shall
have been added as an additional Borrower hereunder pursuant to an
amendment to this Agreement in form and substance satisfactory to the
Agent and Agent's counsel;
(iii) the Borrower or the owner or lessee of the Subsidiary
Collateral or Potential Collateral, as applicable, shall have executed
and delivered to the Agent all Eligible Real Estate Qualification
Documents, all of which instruments, documents or agreements shall be
in form and substance satisfactory to the Agent in its sole discretion;
and
(iv) after giving effect to the inclusion of such Subsidiary
Collateral or Potential Collateral, each of the representations and
warranties made by or on behalf of the Borrower, REA or the Guarantors
or any of their respective Subsidiaries contained in this Agreement,
the other Loan Documents or in any document or instrument delivered
pursuant to or in connection with this Agreement shall be true in all
material respects both as of the date as of which it was made and shall
also be true as of the time of the replacement or addition of Mortgaged
Properties, with the same effect as if made at and as of that time (it
being understood and agreed that any representation or warranty which
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by its terms is made as of a specified date shall be required to be
true and correct only as of such specified date), and no Default or
Event of Default shall have occurred and be continuing, and each of the
Lenders shall have received a certificate of the Borrower and REA
signed by an authorized representative of the Borrower and REA to such
effect.
The Borrower acknowledges that the decision of the Majority Lenders to
grant or withhold their consent to the acceptance of Subsidiary Collateral or
Potential Collateral under this Section 5.3 shall be based entirely on such
factors as the Lenders deem relevant in their sole discretion, including,
without limitation, those enumerated in clauses (i) through (iv) hereinabove,
and such consent may be granted or withheld solely at the discretion of the
Majority Lenders.
In connection with each such addition or substitution, the Borrower,
within fifteen (15) days of the Borrower's request to add such assets to the
Collateral, shall pay to the Agent for the account of the Lenders a review fee
of $7,500 for each asset to be added or replaced, which review fee shall be
split equally among the Lenders, without regard to their respective Commitment
Percentages.
Section 5.4 RELEASE OF MORTGAGED PROPERTY. Provided no Default or Event
of Default shall have occurred hereunder and be continuing (or would exist
immediately after giving effect to the transactions contemplated by this Section
5.4), the Agent shall release a Mortgaged Property from the lien or security
title of the Security Documents encumbering the same upon the request of the
Borrower subject to and upon the following terms and conditions:
(a) the Agent shall determine that the Mortgaged Properties
remaining following such release (i) have a Borrowing Base of not less
than $80,000,000 and (ii) are otherwise satisfactory to the Majority
Lenders in their good faith business judgment;
(b) the Borrower shall deliver to the Agent written notice of
its desire to obtain such release no later than fifteen (15) days prior
to the date on which such release is to be effected;
(c) the Borrower shall submit to the Agent with such request a
Compliance Certificate prepared using the financial statements of REA
most recently provided or required to be provided to the Agent under
Section 6.4 or Section 7.4 adjusted in the best good faith estimate of
the Borrower to give effect to the proposed release and demonstrating
that no Default or Event of Default with respect to the covenants
referred to therein shall exist after giving effect to such release;
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(d) all release documents to be executed by the Agent shall be
in form and substance reasonably satisfactory to the Agent;
(e) the Borrower shall pay all reasonable costs and expenses
of the Agent in connection with such release, including without
limitation, reasonable attorney's fees;
(f) the Borrower shall pay to the Agent for the account of the
Lenders a release price, which payment shall be applied to reduce the
outstanding principal balance of the Loans in an amount equal to the
amount which is necessary to reduce the outstanding principal balance
of the Loans so that no Default or Event of Default shall exist under
Section 9 following such release;
(g) subject to Borrower's right to prepay the entire
outstanding amount of the Loans in whole, but not in part, at no time
during the term of this Agreement shall there be less than twenty (20)
Mortgaged Properties securing the Obligations; and
(h) any release of a Mortgaged Property will not cause the
Borrower to be in violation of the covenants set forth in Section 5.5.
Section 5.5 GEOGRAPHIC CONCENTRATION. The Borrower shall not permit the
aggregate Borrowing Base of the Mortgaged Properties which are located in any
one Metropolitan Statistical Area at any time to equal or exceed thirty percent
(30%) of the aggregate Borrowing Base of all the Mortgaged Properties.
Section 6 REPRESENTATIONS AND WARRANTIES.
Each of the Borrower and REA represents and warrants to the
Agent and the Lenders as follows.
Section 6.1 CORPORATE AUTHORITY, ETC.
(a) INCORPORATION; GOOD STANDING. The Borrower is a Delaware
limited partnership duly organized pursuant to a certificate of limited
partnership dated as of November 3, 1993 and is in good standing under the laws
of Delaware. REA is a Maryland corporation duly organized pursuant to amended
and restated articles of incorporation dated as of December 12, 1997, and is in
good standing under the laws of Maryland. REA is a real estate investment
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trust in full compliance with and entitled to the benefits of Section 856 of the
Code. Each of the Borrower and REA (i) has all requisite power to own its
respective property and conduct its respective business as now conducted and as
presently contemplated, and (ii) is in good standing and is duly authorized to
do business in the jurisdictions where the Mortgaged Properties owned or leased
by it are located and in each other jurisdiction where a failure to be so
qualified in such other jurisdiction could have a materially adverse effect on
the business, assets or financial condition of such Person.
(b) SUBSIDIARIES. Each of the Guarantors and each of the
Subsidiaries of the Borrower, REA and each Guarantor (i) is a corporation,
limited partnership, general partnership, limited liability company or trust
duly organized under the laws of its State of organization and is validly
existing and in good standing under the laws thereof, (ii) has all requisite
power to own its property and conduct its business as now conducted and as
presently contemplated and (iii) is in good standing and is duly authorized to
do business in each jurisdiction where a failure to be so qualified could have a
materially adverse effect on the business, assets or financial condition of the
Borrower, REA, the Guarantors or such Subsidiary.
(c) AUTHORIZATION. The execution, delivery and performance of
this Agreement and the other Loan Documents to which any of the Borrower, REA or
any Guarantor is a party and the transactions contemplated hereby and thereby
(i) are within the authority of such Person, (ii) have been duly authorized by
all necessary proceedings on the part of such Person, (iii) do not and will not
conflict with or result in any breach or contravention of any provision of law,
statute, rule or regulation to which such Person is subject or any judgment,
order, writ, injunction, license or permit applicable to such Person, (iv) do
not and will not conflict with or constitute a default (whether with the passage
of time or the giving of notice, or both) under any provision of the partnership
agreement, articles of incorporation or other charter documents or bylaws of, or
any agreement or other instrument binding upon, such Person or any of its
properties, and (v) do not and will not result in or require the imposition of
any lien or other encumbrance on any of the properties, assets or rights of such
Person.
(d) ENFORCEABILITY. The execution and delivery of this
Agreement and the other Loan Documents to which any of the Borrower, REA or any
Guarantor is a party are valid and legally binding obligations of such Person
enforceable in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights and general principles of equity.
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Section 6.2 GOVERNMENTAL APPROVALS. The execution, delivery and
performance of this Agreement and the other Loan Documents to which the
Borrower, REA or any Guarantor is a party and the transactions contemplated
hereby and thereby do not require the approval or consent of, or filing with,
any governmental agency or authority other than those already obtained and the
filing of the Security Documents in the appropriate records office with respect
thereto.
Section 6.3 TITLE TO PROPERTIES. Except as indicated ON SCHEDULE 6.3
hereto, REA, the Borrower, the Guarantors and their respective Subsidiaries own
or lease all of the assets reflected in the consolidated balance sheet of REA as
at the Balance Sheet Date or acquired or leased since that date (except property
and assets sold or otherwise disposed of in the ordinary course of business
since that date), subject to no rights of others, including any mortgages,
leases, conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
Section 6.4 FINANCIAL STATEMENTS. REA has furnished to the Agent the
financial information described on Schedule 6.4 hereof relating to REA, the
Borrower, the Guarantors, their respective Subsidiaries and the Real Estate.
Such balance sheet and information fairly present the financial condition of
REA, Borrower, the Guarantors and their respective Subsidiaries as of such dates
and the results of the operations of the Borrower, REA, the Guarantors, their
respective Subsidiaries and the Real Estate for such periods. There are no
liabilities, contingent or otherwise, of the Borrower, REA, the Guarantors or
any of their respective Subsidiaries involving material amounts not disclosed in
said balance sheet and the related notes thereto other than the Obligations.
Section 6.5 NO MATERIAL CHANGES. Since the Balance Sheet Date, there
has occurred no materially adverse change in the financial condition or business
of the Borrower, REA, any Guarantor and their respective Subsidiaries taken as a
whole as shown on or reflected in the consolidated balance sheet of the REA as
of the Balance Sheet Date, or its consolidated statement of income or cash flows
for the fiscal year then ended, other than changes in the ordinary course of
business that have not had any materially adverse effect either individually or
in the aggregate on the business or financial condition of such Person.
Section 6.6 FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Borrower, REA,
the Guarantors and their respective Subsidiaries possess all franchises,
patents, copyrights, trademarks, trade names, service marks, licenses and
permits, and rights in respect of the foregoing, adequate for the conduct of
their business substantially as now conducted without known conflict with any
rights of others. None of the Mortgaged Properties is owned or operated under or
by reference to any registered or protected trademark, trade name, service mark
or logo.
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Section 6.7 LITIGATION. Except as stated on SCHEDULE 6.7, there are no
actions, suits, proceedings or investigations of any kind pending or to the
knowledge of the Borrower or REA threatened against the Borrower, REA, any
Guarantor or any of their respective Subsidiaries before any court, tribunal or
administrative agency or board that, if adversely determined, could reasonably
be expected to, either in any case or in the aggregate, materially adversely
affect the properties, assets, financial condition or business of such Person or
materially impair the right of such Person to carry on business substantially as
now conducted by it, or result in any liability not adequately covered by
insurance, or for which adequate reserves are not maintained on the balance
sheet of such Person, or which question the validity of this Agreement or any of
the other Loan Documents, any action taken or to be taken pursuant hereto or
thereto or any lien, security title or security interest created or intended to
be created pursuant hereto or thereto, or which could reasonably be expected to
have a material, adverse affect on the ability of the Borrower, REA, any
Guarantor or any of their respective Subsidiaries to pay and perform the
Obligations in the manner contemplated by this Agreement and the other Loan
Documents.
Section 6.8 NO MATERIALLY ADVERSE CONTRACTS, ETC. None of the Borrower,
REA, any Guarantor or any of their respective Subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation that has or is expected in the future to have a materially
adverse effect on the business, assets or financial condition of such Person.
None of the Borrower, REA, any Guarantor or any of their respective Subsidiaries
is a party to any contract or agreement that has or could reasonably be expected
to have a material adverse effect on the business of any of them.
Section 6.9 COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. None of the
Borrower, REA, the Guarantors or any of their respective Subsidiaries is in
violation of any provision of its charter or other organizational documents,
bylaws, or any agreement or instrument to which it is subject or by which it or
any of its properties is bound or any decree, order, judgment, statute, license,
rule or regulation, in any of the foregoing cases in a manner that could
reasonably be expected to result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or business
of such Person.
Section 6.10 TAX STATUS. Each of the Borrower, REA, the Guarantors and
their respective Subsidiaries (a) has made or filed all federal and state income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject, as the filing periods may have been extended, (b) has
paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which
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such returns, reports or declarations apply. Except as provided in the foregoing
sentence, there are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of such Person know
of no basis for any such claim.
Section 6.11 NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
Section 6.12 HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the
Borrower, REA, the Guarantors or any of their respective Subsidiaries is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is any of them an "investment company",
or an "affiliated company" or a "principal underwriter" of an "investment
company", as such terms are defined in the Investment Company Act of 1940.
Section 6.13 ABSENCE OF UCC FINANCING STATEMENTS, ETC. Except with
respect to Permitted Liens and in connection with any secured Indebtedness
permitted under Section 8.1, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any applicable filing records, registry, or other public office,
that purports to cover, affect or give notice of any present or possible future
lien on, or security interest or security title in, any property of the
Borrower, REA, any Guarantor or their respective Subsidiaries or rights
thereunder.
Section 6.14 SETOFF, ETC. The Collateral and the rights of the Agent
and the Lenders with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Borrower, REA and each Guarantor are
the owners of their respective Collateral free from any lien, security interest,
encumbrance or other claim or demand, except those encumbrances permitted in the
Mortgages.
Section 6.15 CERTAIN TRANSACTIONS. Except as disclosed on Schedule 6.15
hereto, none of the partners, officers, trustees, directors, or employees of the
Borrower, REA, any Guarantor or any of their respective Subsidiaries is a party
to any material agreement with the Borrower, REA or any Guarantor (other than
for services as partners, employees, officers and directors), including any such
agreement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any partner, officer, trustee, director or such employee or, to the
knowledge of the Borrower or REA, any corporation, partnership, trust or other
entity in which any partner, officer, trustee, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner.
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Section 6.16 EMPLOYEE BENEFIT PLANS. The Borrower, REA, each Guarantor
and each ERISA Affiliate has fulfilled its obligation, if any, under the minimum
funding standards of ERISA and the Code with respect to each Employee Benefit
Plan, Multiemployer Plan or Guaranteed Pension Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the Code
with respect to each Employee Benefit Plan, Multiemployer Plan or Guaranteed
Pension Plan. Neither the Borrower, any Guarantor nor any ERISA Affiliate has
(a) sought a waiver of the minimum funding standard under Section 412 of the
Code in respect of any Employee Benefit Plan, Multiemployer Plan or Guaranteed
Pension Plan, (b) failed to make any contribution or payment to any Employee
Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, or made any
amendment to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension
Plan, which has resulted or could result in the imposition of a Lien or the
posting of a bond or other security under ERISA or the Code, or (c) incurred any
liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA. None of the Mortgaged Properties
constitutes a "plan asset" of any Employee Plan, Multiemployer Plan or
Guaranteed Pension Plan.
Section 6.17 DISCLOSURE. No representation or warranty of the Borrower,
REA or any Guarantor contained in this Agreement or the other Loan Documents or
in any other document, certificate or written statement furnished to the Agent
or the Lenders by or on behalf of the Borrower, REA or any Guarantor for use in
connection with the transactions contemplated by the Loan Documents contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein, taken as a whole,
not misleading in light of the circumstances in which the same were made or will
be made.
Section 6.18 TRADE NAME; PLACE OF BUSINESS. Neither the Borrower, REA
nor any Guarantor uses any trade name and conducts business under any name other
than its actual name set forth in the Loan Documents. The principal place of
business of each of the Borrower, REA and each Guarantor is 620 West Germantown
Pike Suite 200, Plymouth Meeting, Pennsylvania 19462.
Section 6.19 REGULATIONS U And X. No portion of any Loan is to be used
for the purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
Section 6.20 ENVIRONMENTAL COMPLIANCE. To the best of the knowledge and
belief of the Borrower and REA, except as specifically set forth in the written
environmental site assessment reports of the Environmental Engineer provided to
the Agent on or before the date hereof, or in
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the case of Real Estate acquired after the date hereof, the environmental site
assessment reports with respect thereto provided to the Agent:
(a) Neither the Borrower, REA, any Guarantor, their respective
Subsidiaries nor any operator of the Real Estate, nor any operations thereon, is
in violation, or alleged violation, of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters, including
without limitation, those arising under the Resource Conservation and Recovery
Act ("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic Substances Control Act, or any state or local statute,
regulation, ordinance, order or decree relating to the environment (hereinafter
"Environmental Laws"), which violation involves Real Estate and would have a
material adverse effect on the environment or the business, assets or financial
condition of the Borrower, REA, the Guarantors or any of their respective
Subsidiaries.
(b) Neither the Borrower, REA, any Guarantor nor any of their
respective Subsidiaries has received notice from any third party including,
without limitation, any federal, state or local governmental authority, (i) that
it has been identified by the United States Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a site
listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986);
(ii) that any hazardous waste, as defined by 42 U.S.C. Section 9601(5), any
hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic substances,
oil or hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which it has generated, transported
or disposed of have been found at any site at which a federal, state or local
agency or other third party has conducted or has ordered that the Borrower, REA,
any Guarantor or any of their respective Subsidiaries conduct a remedial
investigation, removal or other response action pursuant to any Environmental
Law; or (iii) that it is or shall be a named party to any claim, action, cause
of action, complaint, or legal or administrative proceeding (in each case,
contingent or otherwise) arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances.
(c) (i) No portion of the Real Estate has been used for the
handling, processing, storage or disposal of Hazardous Substances except in
accordance with applicable Environmental Laws, and no underground tank or other
underground storage receptacle for Hazardous Substances is located on any
portion of the Real Estate; (ii) in the course of any activities conducted by
the Borrower, REA, any Guarantor, their respective Subsidiaries or the
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operators of their properties, no Hazardous Substances have been generated or
are being used on the Real Estate except in the ordinary course of business and
in accordance with applicable Environmental Laws; (iii) there has been no past
or present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping (other than the storing
of materials in reasonable quantities to the extent necessary for the operation
of an office building in the ordinary course of business, and in any event in
compliance with all Environmental Laws) (a "Release") or threatened Release of
Hazardous Substances on, upon, into or from the Real Estate, or on, upon, into
or from the other properties of the Borrower, REA, any Guarantor or their
respective Subsidiaries, which Release would have a material adverse effect on
the value of any of the Real Estate or adjacent properties or the environment;
(iv) there have been no Releases on, upon, from or into any real property in the
vicinity of any of the Real Estate which, through soil or groundwater
contamination, may have come to be located on, and which would have a material
adverse effect on the value of, the Real Estate; and (v) any Hazardous
Substances that have been generated on any of the Real Estate have been
transported off-site in accordance with all applicable Environmental Laws.
(d) Neither the Borrower, REA, any Guarantor, their respective
Subsidiaries nor the Real Estate is subject to any applicable Environmental Law
requiring the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the transactions set
forth herein and contemplated hereby, or as a condition to the recording of the
Mortgages or to the effectiveness of any other transactions contemplated hereby.
(e) None of the following are or will be located in, on, under
or constitute a part of the Real Estate: asbestos or asbestos-containing
material in any form or condition; urea formaldehyde insulation; or transformers
or other equipment which contain dielectric fluid containing polychlorinated
biphenyls.
(f) There are no existing or closed sanitary landfills, solid
waste disposal sites, or hazardous waste treatment, storage or disposal
facilities on or affecting the Real Estate.
(g) There has been no claim by any party that any use,
operation, or condition of the Real Estate has caused any nuisance or any other
liability or adverse condition on any other property nor is there any knowledge
of any basis for such a claim.
Section 6.21 INTENTIONALLY OMITTED.
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Section 6.22 LEASES. The Borrower has delivered to the Agent true
copies of the Leases relating to each Mortgaged Property required to be
delivered as a part of the Eligible Real Estate Qualification Documents as of
the date hereof.
Section 6.23 INTENTIONALLY OMITTED.
Section 6.24 MORTGAGED PROPERTY. The Borrower and REA make the
following representations and warranties concerning each of the Mortgaged
Properties:
(a) OFF-SITE UTILITIES. All water, sewer, electric, gas,
telephone and other utilities necessary for the use and operation of the
Mortgaged Property are installed to the property lines of the Mortgaged Property
through dedicated public rights-of-way or through perpetual private easements
approved by the Agent with respect to which the applicable Mortgage creates a
valid and enforceable first lien or security title and, except in the case of
drainage facilities, are connected to the Building located thereon with valid
permits and are adequate to service the Building in compliance with applicable
law.
(b) ACCESS, ETC. The streets abutting the Mortgaged Property
are dedicated and accepted public roads, to which the Mortgaged Property has
direct access by trucks and other motor vehicles and by foot, or are perpetual
private ways or easements (with direct access by trucks and other motor vehicles
and by foot to public roads) to which the Mortgaged Property has direct access
approved by the Agent and with respect to which the applicable Mortgage creates
a valid and enforceable first lien or security title. All private ways or
easements providing access to the Mortgaged Property are zoned in a manner which
will permit access to the Building over such ways or easements by trucks and
other commercial and industrial vehicles.
(c) INDEPENDENT BUILDING. The Building is fully independent in
all respects including, without limitation, in respect of structural integrity,
heating, ventilating and air conditioning, plumbing, mechanical and other
operating and mechanical systems, and electrical, sanitation and water systems,
all of which are connected directly to off-site utilities located in public
streets or ways or through insured perpetual private easements approved by the
Agent. The Building is located on a lot which is separately assessed for
purposes of real estate tax assessment and payment. The Building, all Personal
Property and all paved or landscaped areas related to or used in connection with
the Building are located wholly within the perimeter lines of the lot or lots on
which the Mortgaged Property is located, except as may be specifically shown on
the Survey for such Mortgaged Property.
(d) CONDITION OF BUILDING. To the best of the knowledge and
belief of the Borrower and REA, the Building is structurally sound, in good
repair and free of defects in materials and workmanship. To the best of the
knowledge and belief of the Borrower and REA, all major building systems located
within the Building, including without limitation heating, ventilating and air
conditioning, electrical, sprinkler, plumbing or other mechanical systems (but
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excluding any systems which are required to be maintained by tenants), are in
good working order and condition. To the best of the knowledge and belief of the
Borrower and REA, since the date of the property condition reports delivered to
the Agent prior to the date hereof, there has been no materially adverse change
to the physical condition of any of the Mortgaged Property, including as a
result of any fire, explosion, accident, flood or other casualty.
(e) BUILDING COMPLIANCE WITH LAW. Neither the Borrower, REA
nor any Guarantor has received any notice of, and has no knowledge of, any
violation by the Building as presently constructed, used, occupied and operated
any applicable federal or state law or governmental regulation, or any local
ordinance, order or regulation, including but not limited to laws, regulations,
or ordinances relating to zoning, building use and occupancy, subdivision
control, fire protection, health, sanitation, safety, handicapped access,
tidelands, wetlands and flood control (hereinafter referred to as the
"Requirements"). The Building complies with applicable zoning laws and
regulations and is not a so-called non-conforming use. The zoning laws permit
use of the Building for its current use. There is such number of parking spaces
on the lot or lots on which the Mortgaged Property is located as is adequate
under the zoning laws and regulations to permit use of the Building for its
current use. Each Mortgaged Property constitutes a separate parcel which has
been properly subdivided in accordance with all applicable state and local laws,
regulations and ordinances to the extent required thereby, and neither the
execution and delivery of the Mortgages nor the exercise of any remedies
thereunder by Agent shall violate any such law or regulation relating to the
subdivision of real property.
(f) NO REQUIRED MORTGAGED PROPERTY CONSENTS, PERMITS, ETC.
Neither the Borrower, REA nor any Guarantor has received any notice of, and has
no knowledge of, any approvals, consents, licenses, permits issued by any
governmental or quasi-governmental authority, utility installations and
connections (including, without limitation, drainage facilities), curb cuts and
street openings, required by applicable laws, rules, ordinances or regulations
or any agreement affecting the Mortgaged Property for the maintenance,
operation, servicing and use of the Mortgaged Property or the Building for its
current use (hereinafter referred to as the "Project Approvals") which have not
been granted, effected, or performed and completed (as the case may be), or any
fees or charges therefor which have not been fully paid, or which are no longer
in full force and effect. No Project Approvals (including, without limitation,
any railway siding agreements) will terminate, or become void or voidable or
terminable on any foreclosure sale of the Mortgaged Property pursuant to the
Mortgage. To the best knowledge of the Borrower and REA, there are no
outstanding notices, suits, orders, decrees or judgments relating to zoning,
building use and occupancy, fire, health, sanitation or other violations
affecting, against, or with respect to, the Mortgaged Property or any part
thereof.
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(g) NO VIOLATIONS. Neither the Borrower, REA nor any Guarantor
has received written notice of, nor has any knowledge of, any violation of any
applicable Requirements, Project Approvals or any other restrictions or
agreements by which the Borrower, Guarantor or the Mortgaged Property is bound.
(h) INSURANCE. Neither the Borrower, REA nor any Guarantor has
received any written notice from any insurer or its agent requiring performance
of any work with respect to the Mortgaged Property or canceling or threatening
to cancel any policy of insurance, and the Mortgaged Property complies with the
requirements of all of the relevant insurance carriers of the Borrower, REA and
the Guarantors.
(i) REAL PROPERTY AND OTHER TAXES; SPECIAL ASSESSMENTS. There
are no unpaid or outstanding real estate or other taxes or assessments on or
against the Mortgaged Property or any part thereof which are payable by the
Borrower, REA or any Guarantor (except real estate or other taxes or assessments
that are not yet delinquent or subject to any penalties, interest or other late
charges or which are being contested in good faith by appropriate proceedings
and for which the Borrowers, REA or such Guarantor has set aside reserves
adequate to pay same). There are no unpaid or outstanding gross receipts, rent
or sales taxes payable by the Borrower, REA or any Guarantor with respect to the
use and operation of the Mortgaged Property which are due and payable. The
Borrower has delivered to the Agent true and correct copies of real estate tax
bills for the Mortgaged Property for the past three fiscal tax years. No
abatement proceedings are pending with reference to any real estate taxes
assessed against the Mortgaged Property. To the best of the knowledge and belief
of the Borrower and REA, there are no betterment assessments or other special
assessments presently pending with respect to any portion of the Mortgaged
Property, and neither the Borrower, REA nor any Guarantor has received any
written notice of any such special assessment being contemplated.
(j) HISTORIC STATUS. The Building is not a historic structure
or landmark and neither the Building nor the Mortgaged Property is located
within any historic district pursuant to any federal, state or local law or
governmental regulation.
(k) EMINENT DOMAIN; CASUALTY. Except as set forth on Schedule
6.24(k) hereto, there are no pending eminent domain proceedings against the
Mortgaged Property or any part thereof, and, to the best of the knowledge and
belief of the Borrower and REA no such proceedings are presently threatened or
contemplated by any taking authority. Neither the Mortgaged Property, the
Building nor any part thereof is now materially damaged or injured as a result
of any fire, explosion, accident, flood or other casualty.
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(l) LEASES. An accurate and complete Rent Roll and Lease
Summary as of the date of inclusion of each Mortgaged Property in the Collateral
(or such other recent date as may be required by the Agent) with respect to all
Leases of any portion of the Mortgaged Property has been provided to the Agent.
The Leases reflected on such Rent Roll constitute as of the date thereof the
sole agreements relating to leasing or licensing of space at such Mortgaged
Property and in the Building relating thereto. None of the Leases has been
modified, changed, altered, assigned, supplemented or amended in any respect,
except as reflected on the Rent Roll, and no tenant is entitled to any free
rent, partial rent, rebate of rent payments, credit, offset or deduction in
rent, including, without limitation, lease support payments or lease buy-outs,
except as reflected in the Rent Roll. There are no occupancies, rights,
privileges or licenses in or to any Mortgaged Property or portion thereof other
than pursuant to the Leases reflected in Rent Rolls previously furnished to the
Agent for such Mortgaged Property. Except as set forth in each Rent Roll, the
Leases reflected therein are in full force and effect in accordance with their
respective terms, without any payment default or any other material default
thereunder, nor are there any defenses, counterclaims, offsets, concessions or
rebates available to any tenant thereunder, and neither the Borrower, REA nor
any Guarantor has given or made, any notice of any payment or other material
default, or any claim, which remains uncured or unsatisfied, with respect to any
of the Leases, and to the best of the knowledge and belief of the Borrower and
REA, there is no basis for any such claim or notice of default by any tenant. No
property other than the Mortgaged Property which is the subject of the
applicable Lease is necessary to comply with the requirements (including,
without limitation, parking requirements) contained in such Lease. The Rent
Rolls furnished to the Agent accurately and completely set forth all rents
payable by and security, if any, deposited by tenants, no tenant having paid
more than one month's rent in advance. Except as described in SCHEDULE 6.24(l)
attached hereto, all tenant improvements or work to be done, furnished or paid
for by the Borrower, REA or any Guarantor, or credited or allowed to a tenant,
for, or in connection with, the Building pursuant to any Lease has been
completed and paid for or provided for in a manner satisfactory to the Agent,
and, except as set forth on Schedule 6.24(l), no material leasing, brokerage or
like commissions, fees or payments are due from the Borrower in respect of the
Leases.
(m) MANAGEMENT AGREEMENT. On and as of the Closing Date, the
Mortgaged Properties are self managed by the Borrower and no Management
Agreements with any third party or Affiliate exist.
(n) OTHER MATERIAL REAL PROPERTY AGREEMENTS; NO OPTIONS. There
are no material agreements pertaining to the Mortgaged Property, any Building
thereon or the operation or maintenance of either thereof other than as
described in this Agreement (including the
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Schedules hereto) or otherwise disclosed in writing to the Agent and the Lenders
by the Borrower, REA or any Guarantor; and no person or entity has any right or
option to acquire the Mortgaged Property or any Building thereon or any portion
thereof or interest therein.
Section 6.25 BROKERS. Neither the Borrower, REA, any Guarantor nor any
of their respective Subsidiaries has engaged or otherwise dealt with any broker,
finder or similar entity in connection with this Agreement or the Loans
contemplated hereunder.
Section 6.26 OWNERSHIP. REA is the sole general partner of the Borrower
and as of the date hereof owns a 53.00% partnership interest in the Borrower.
All of the limited partners of the Borrower as of the date hereof are set forth
on Schedule 6.26 hereto. All of the Subsidiaries of the Borrower, REA and the
Guarantors as of the date hereof are set forth on Schedule 6.26. The form and
jurisdiction of organization of, and the ownership interests of the Borrower,
REA and each Guarantor in, each of their respective Subsidiaries as of the date
hereof are set forth in said SCHEDULE 6.26. As of the date hereof, neither the
Borrower, REA or any Guarantor owns any interest in any joint ventures or other
entities which are not Subsidiaries.
Section 6.27 OTHER DEBT. Neither the Borrower, REA, any Guarantor nor
any of their respective Subsidiaries is in default of the payment of any
Indebtedness or any other agreement, mortgage, deed of trust, security
agreement, financing agreement, indenture or lease to which any of them is a
party. Neither the Borrower, REA nor any Guarantor is a party to or bound by any
agreement, instrument or indenture that may require the subordination in right
or time or payment of any of the Obligations to any other indebtedness or
obligation of the Borrower, REA or any Guarantor. Schedule 6.27 hereto sets
forth all agreements, mortgages, deeds of trust, financing agreements or other
material agreements binding upon the Borrower, REA and each Guarantor or their
respective properties and entered into by the Borrower, REA and or such
Guarantor as of the date of this Agreement with respect to any Indebtedness of
the Borrower, REA or any Guarantor, and the Borrower has provided the Agent with
true, correct and complete copies thereof.
Section 6.28 SOLVENCY. As of the Closing Date and after giving effect
to the transactions contemplated by this Agreement and the other Loan Documents,
including all Loans made or to be made hereunder, neither the Borrower, REA nor
any Guarantor is insolvent on a balance sheet basis such that the sum of such
Person's assets exceeds the sum of such Person's liabilities, each of the
Borrower, REA and each Guarantor is able to pay its debts as they become due,
and each of the Borrower, REA and each Guarantor has sufficient capital to carry
on its business.
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Section 6.29 NO BANKRUPTCY FILING. None of the Borrower, REA or any
Guarantor is contemplating either the filing of a petition by it under any state
or federal bankruptcy or insolvency laws or the liquidation of its assets or
property, and neither the Borrower nor REA has knowledge of any Person
contemplating the filing of any such petition against it or any Guarantor.
Section 6.30 NO FRAUDULENT INTENT. Neither the execution and delivery
of this Agreement or any of the other Loan Documents nor the performance of any
actions required hereunder or thereunder is being undertaken by the Borrower,
REA or any Guarantor with or as a result of any actual intent by any of such
Persons to hinder, delay or defraud any entity to which any of such Persons is
now or will hereafter become indebted.
Section 6.31 TRANSACTION IN BEST INTERESTS OF BORROWER; CONSIDERATION.
The transaction evidenced by this Agreement and the other Loan Documents is in
the best interests of the Borrower, REA and each Guarantor and the creditors of
such Persons. The direct and indirect benefits to inure to the Borrower, REA and
each Guarantor pursuant to this Agreement and the other Loan Documents
constitute substantially more than "reasonably equivalent value" (as such term
is used in Section 548 of the Bankruptcy Code) and "valuable consideration,"
"fair value," and "fair consideration," (as such terms are used in any
applicable state fraudulent conveyance law), in exchange for the benefits to be
provided by the Borrower, REA and each Guarantor pursuant to this Agreement and
the other Loan Documents, and but for the willingness of REA and each Guarantor
to guaranty the Loan, the Borrower would be unable to obtain the financing
contemplated hereunder which financing will enable the Borrower, REA, each
Guarantor and their respective Subsidiaries to have available financing to
conduct and expand their business.
Section 6.32 YEAR 2000 COMPLIANT. Borrower has (i) undertaken a
reasonably detailed inventory, review and assessment of all areas within its
business and operations that could reasonably be expected to be adversely
affected by the failure to be Year 2000 Compliant prior to September 30, 1999,
(ii) developed a reasonably detailed plan and timeline for such Information
Technology to become Year 2000 Compliant prior to September 30, 1999, and (iii)
to date, implemented that plan in accordance with that timetable in all material
aspects. Borrower reasonably anticipates that such Information Technology will
be Year 2000 Compliant by September 30, 1999 or such earlier date as is
necessary to avoid any material disruption of Borrower's business and has
committed and will commit reasonably adequate resources to its Year 2000
compliance program.
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Section 7 AFFIRMATIVE COVENANTS.
Each of the Borrower and REA covenants and agrees that, so long as any
Loan or Note is outstanding or any Lender has any obligation to make any Loans:
Section 7.1 PUNCTUAL PAYMENT. The Borrower will duly and punctually pay
or cause to be paid the principal and interest on the Loans and all interest and
fees provided for in this Agreement, all in accordance with the terms of this
Agreement and the Notes, as well as all other sums owing pursuant to the Loan
Documents.
Section 7.2 MAINTENANCE OF OFFICE. The Borrower, REA and each Guarantor
will maintain its respective chief executive office at 620 West Germantown Pike,
Plymouth Meeting, Pennsylvania 19462, or at such other place in the United
States of America as the Borrower, REA or any Guarantor shall designate upon
thirty (30) days prior written notice to the Agent and the Lenders, where
notices, presentations and demands to or upon the Borrower, REA or such
Guarantor in respect of the Loan Documents may be given or made.
Section 7.3 RECORDS AND ACCOUNTS. The Borrower, REA and each Guarantor
will (a) keep, and cause each of their respective Subsidiaries to keep, true and
accurate records and books of account in which full, true and correct entries
will be made in accordance with GAAP and (b) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation and amortization
of its properties and the properties of their respective Subsidiaries,
contingencies and other reserves. Neither the Borrower, REA, any Guarantor nor
any of their respective Subsidiaries shall, without the prior written consent of
the Majority Lenders, (x) make any material change to the accounting procedures
used by such Person in preparing the financial statements and other information
described in Section 6.4 or Section 7.4, or (y) change its fiscal year.
Section 7.4 FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. REA
will deliver or cause to be delivered to each of the Lenders:
(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of REA, the audited balance
sheet of REA at the end of such year (both on a consolidated basis with the
Borrower and their respective Subsidiaries and on an unconsolidated basis), and,
if requested, the related audited statements of income, changes in capital and
cash flows for such year (both on a consolidated basis with the Borrower and
their respective Subsidiaries and if requested by the Agent, on an
unconsolidated basis), each setting forth in comparative form the figures for
the previous fiscal year and all such statements to be in reasonable detail,
prepared in accordance with GAAP, and accompanied by an auditor's report
prepared without qualification as to the scope of the audit by a "Big Six"
accounting firm, and
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any other information the Lenders may need to complete a financial analysis of
REA, the Borrower and their respective Subsidiaries, in any event together with
a written statement from such accountants to the effect that they have read this
Agreement, and that, in making the examination necessary to said certification,
they have obtained no knowledge of any Default or Event of Default, or, if such
accountants shall have obtained knowledge of any Default or Event of Default
they shall disclose in such statement any such Default or Event of Default;
(b) as soon as practicable, but in any event not later than
forty five (45) days after the end of each of the first three fiscal quarters of
REA, copies of the unaudited balance sheet of REA as at the end of such quarter
(both on a consolidated basis with the Borrower and their respective
Subsidiaries and if requested by the Agent, on an unconsolidated basis), and the
related unaudited statements of income, changes in capital and cash flows for
the portion of REA's fiscal year then elapsed (both on a consolidated basis with
the Borrower and their respective Subsidiaries and if requested by the Agent, on
an unconsolidated basis), and a statement showing the aging of the receivables
for the Mortgaged Properties, all in reasonable detail and prepared in
accordance with GAAP, together with a certification by the chief financial
officer or accounting officer of REA that the information contained in such
financial statements fairly presents the financial position of REA the Borrower
and their respective Subsidiaries on the date thereof (subject to year-end
adjustments);
(c) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement (a
"Compliance Certificate") certified by the chief financial officer or chief
accounting officer of REA in the form of EXHIBIT H hereto (or in such other form
as the Agent may approve from time to time) setting forth in reasonable detail
computations evidencing compliance with the covenants contained in Section 9 and
the other covenants described in such certificate and (if applicable) setting
forth reconciliations to reflect changes in GAAP since the Balance Sheet Date.
The Compliance Certificate shall be accompanied by copies of the statements of
Consolidated Operating Cash Flow for each such fiscal quarter and the preceding
fiscal quarters for REA and a statement of Gross Cash Receipts, Operating
Expenses and Net Operating Income for each such fiscal quarter and the preceding
fiscal quarter for each of the Mortgaged Properties, prepared on a basis
consistent with the statements furnished to the Lenders prior to the date hereof
and otherwise in form and substance satisfactory to the Agent, together with a
certification by the chief financial officer or chief accounting officer of REA
that the information contained in such statement fairly presents the
Consolidated Operating Cash Flow, Net Operating Income, Gross Cash Receipts and
Operating Expenses of REA and the Mortgaged Properties, as applicable, for such
periods;
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(d) as soon as practicable but in any event not later than
forty five (45) days after the end of each fiscal quarter of REA (including the
fourth fiscal quarter in each year), an updated Rent Roll with respect to each
Mortgaged Property, a summary of each such Rent Roll, and a leasing activity
report with respect to each Mortgaged Property setting forth the efforts to
market and lease the then unleased space in each Mortgaged Property and the
results of such efforts;
(e) simultaneously with the delivery of the financial
statement referred to in subsection (a) above, the business plan of REA for the
current fiscal year and a statement (i) listing the Real Estate owned or leased
by REA, the Borrower, the Guarantors and their respective Subsidiaries and
stating the location thereof, the date acquired and the acquisition cost
thereof, (ii) listing the Indebtedness of REA, the Borrower, the Guarantors and
their respective Subsidiaries (excluding Indebtedness of the type described in
Section 8.1(b)-(e)), which statement shall include, without limitation, a
statement of the original principal amount of such Indebtedness and the current
amount outstanding, the holder thereof, the maturity date and any extension
options, the interest rate, the collateral provided for such Indebtedness and
whether such Indebtedness is recourse or non-recourse, (iii) listing the Real
Estate, if any, owned or leased by REA, the Borrower, the Guarantors and their
respective Subsidiaries which is Under Development and providing a brief summary
of the status of such development and (iv) listing any new Subsidiaries of the
Borrower, REA or any Guarantor and the ownership thereof, and any change of
ownership of any existing Subsidiaries;
(f) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature sent to the partners of the
Borrower or the partners or shareholders of REA or any Guarantor;
(g) promptly after they are filed with the Internal Revenue
Service, copies of all annual federal income tax returns and amendments thereto
of the Borrower, REA and each Guarantor;
(h) promptly following the end of each fiscal quarter of REA,
evidence of all Swap Agreements entered into and still open by Borrower, REA,
the Guarantors and/or their respective Subsidiaries; and
(i) from time to time such other financial data and
information in the possession of the Borrower, REA, each Guarantor or their
respective Subsidiaries (including
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without limitation auditors' management letters, property inspection and
environmental reports and information as to zoning and other legal and
regulatory changes affecting the Borrower, REA or any Guarantor) as the Agent
may reasonably request.
Notwithstanding anything to the contrary set forth in this Agreement, during any
period of time that the percentage partnership interest of REA in the Borrower
falls below the ownership threshold which, in accordance with GAAP, would permit
the consolidation of the accounts of the Borrower with the accounts of REA:
(i) pursuant to Section 7.4(a), REA shall cause to be prepared
and delivered the audited balance sheet and financial statements of REA
and the Borrower which are described therein on an unconsolidated
basis, together with an agreed upon procedures report from the
accountants who are preparing such balance sheets and financial
statements showing the consolidation of such balance sheets and
financial statements as if such consolidation were permitted by GAAP
and otherwise in form acceptable to the Agent and, if requested by the
Agent, an audited balance sheet and financial statement of the Borrower
consolidated in accordance with GAAP;
(ii) pursuant to Section 7.4(b), REA shall prepare and deliver
the unaudited balance sheets and financial statements of REA and the
Borrower which are described therein on a consolidated basis (whether
or not such consolidation is permitted by GAAP) based on consolidation
methods and procedures in accordance with GAAP;
(iii) pursuant to Section 7.4(c), REA shall prepare and
deliver the Compliance Certificates described therein and calculate
compliance with the covenants set forth in Section 9 and the other
covenants described in such Compliance Certificates on the basis of the
consolidated balance sheets and financial statements of REA and the
Borrower which are described in subclauses (i) and (ii) hereof; and
(iv) all other terms and provisions of this Agreement
(including defined terms) which depend upon or make reference to the
consolidated financial results, balance sheets or financial statements
of REA shall be construed to mean such consolidated results, balance
sheets or financial statements of REA and the Borrower which are
prepared and determined in accordance with subclauses (i), (ii) and
(iii) hereof.
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Section 7.5 NOTICES.
(a) DEFAULTS. The Borrower and REA will immediately upon
becoming aware of same notify the Agent in writing of the occurrence of any
Default or Event of Default. If any Person shall give any notice or take any
other action in respect of a claimed default (whether or not constituting an
Event of Default) under this Agreement or under any note, evidence of
indebtedness, indenture or other obligation to which or with respect to which
the Borrower, REA, any Guarantor or any of their respective Subsidiaries is a
party or obligor, whether as principal or surety, and such default would permit
the holder of such note or obligation or other evidence of indebtedness to
accelerate the maturity thereof, which acceleration would have a material
adverse effect on the Borrower, REA or any Guarantor, the Borrower and REA shall
forthwith give written notice thereof to the Agent and each of the Lenders,
describing the notice or action and the nature of the claimed default.
(b) ENVIRONMENTAL EVENTS. The Borrower and REA will give
notice to the Agent within five (5) Business Days of becoming aware of (i) any
potential or known Release, or threat of Release, of any Hazardous Substances at
or from any Real Estate; (ii) any violation of any Environmental Law that the
Borrower, REA, any Guarantor or any of their respective Subsidiaries reports in
writing or is reportable by such Person in writing (or for which any written
report supplemental to any oral report is made) to any federal, state or local
environmental agency or (iii) any inquiry, proceeding, investigation, or other
action, including a notice from any agency of potential environmental liability,
of any federal, state or local environmental agency or board, that in either
case involves any Real Estate and could reasonably be expected to materially
affect the assets, liabilities, financial condition or operations of the
Borrower, REA, any Guarantor or any of their respective Subsidiaries or the
Agent's liens or security title on the Collateral pursuant to the Security
Documents.
(c) NOTIFICATION OF CLAIMS AGAINST COLLATERAL. The Borrower
and REA will give notice to the Agent in writing within five (5) Business Days
of becoming aware of any setoff, claims (including, with respect to the Real
Estate, environmental claims), withholdings or other defenses to which any of
the Collateral, or the rights of the Agent or the Lenders with respect to the
Collateral, are subject.
(d) NOTICE OF LITIGATION AND JUDGMENTS. The Borrower and REA
will give notice to the Agent in writing within five (5) Business Days of
becoming aware of any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting the Borrower, REA any Guarantor or
any of their respective Subsidiaries or to which the Borrower,
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REA, any Guarantor or any of their respective Subsidiaries is or is to become a
party involving an uninsured claim against any of the Borrower, REA, any
Guarantor or any of their respective Subsidiaries that could reasonably be
expected to have a materially adverse effect on the Borrower, REA or any
Guarantor stating the nature and status of such litigation or proceedings. The
Borrower, REA and each Guarantor will give notice to the Agent, in writing, in
form and detail reasonably satisfactory to the Agent and each of the Lenders,
within ten days of any judgment not covered by insurance, whether final or
otherwise, against any of the Borrower, REA, any Guarantor or any of their
respective Subsidiaries in an amount in excess of $1,000,000.
(e) NOTICE OF PROPOSED SALES, ENCUMBRANCES, REFINANCE OR
TRANSFER OF NON-MORTGAGED PROPERTY. The Borrower and REA will give notice to the
Agent of any proposed or completed sale, encumbrance, refinance or transfer of
any Real Estate (other than the Mortgaged Properties) of the Borrower, REA, any
Guarantor or their respective Subsidiaries within any fiscal quarter of REA,
such notice to be submitted together with the Compliance Certificate provided or
required to be provided to the Lenders under Section 7.4 with respect to such
fiscal quarter. The Compliance Certificate shall with respect to any proposed or
completed sale, encumbrance, refinance or transfer be adjusted in the best good
faith estimate of REA to give effect to such sale, encumbrance, refinance or
transfer and demonstrate that no Default or Event of Default with respect to the
covenants referred to therein shall exist after giving effect to such sale,
encumbrance, refinance or transfer.
(f) NOTIFICATION OF LENDERS. Within five(5) Business Days
after receiving any notice under this Section 7.5, the Agent will forward a copy
thereof to each of the Lenders, together with copies of any certificates or
other written information that accompanied such notice.
(g) NOTICE OF OCCUPANCY OR TERMINATION BY TENANT. The Borrower
and REA will give written notice to the Agent in writing within five (5)
Business Days of becoming aware of the termination of a Lease within a Mortgaged
Property covering either 10,000 square feet or more or five percent (5%) or more
of the aggregate Net Rentable Area of such Mortgaged Property, and such notice
shall state the name of the tenant and the Mortgaged Property affected and the
amount of the base rent and additional rent that such tenant was obligated to
pay. The Borrower and REA shall deliver to the Agent within thirty (30) days
after the end of each fiscal quarter a true and correct copy of each Lease
within a Mortgaged Property entered into by or on behalf of the Borrower, REA,
any Guarantor or their respective Subsidiaries during the preceding quarter and
not previously delivered to the Agent.
Section 7.6 EXISTENCE; COMPLIANCE WITH ENVIRONMENTAL RECOMMENDATIONS.
(a) The Borrower will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence as a
Delaware limited partnership. REA will do or
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cause to be done all things necessary to preserve and keep in full force and
effect its existence as a Maryland corporation. Each Guarantor will do or cause
to be done all things necessary to preserve and keep in full force and effect
its legal existence in the jurisdiction of its incorporation or formation. The
Borrower and REA will cause each of their respective Subsidiaries to do or cause
to be done all things necessary to preserve and keep in full force and effect
their legal existence in the jurisdiction of its incorporation or formation. The
Borrower and REA will do or cause to be done all things necessary to preserve
and keep in full force all of their respective rights and franchises and those
of their respective Subsidiaries, the preservation of which is necessary to the
conduct of their business. The Borrower and REA will, and will cause each of
their respective Subsidiaries to, continue to engage primarily in the businesses
now conducted by them and in related businesses. The common stock of REA shall
at all times be listed for trading and be traded on the American Stock Exchange
(AMEX) or the New York Stock Exchange (NYSE), unless otherwise consented to by
Majority Lenders.
(b) Without limitation of the obligations of the Borrower or
REA under this Agreement with respect to the maintenance of the Mortgaged
Properties, the Borrower and REA shall promptly and diligently comply with the
recommendations of the Environmental Engineer concerning the Mortgaged
Properties contained in the building inspection and environmental reports
delivered to the Agent.
Section 7.7 INSURANCE. The Borrower, REA or the applicable Guarantor
will, at its expense, procure and maintain for the benefit of the Borrower, REA
or such Guarantor and the Agent, insurance policies issued by such insurance
companies, in such amounts, in such form and substance, and with such coverages,
endorsements, deductibles and expiration dates (which shall not be less than 12
months from the date of issuance of such coverage) as are reasonably acceptable
to the Agent, providing the following types of insurance covering each Mortgaged
Property:
(i) "all Risks" property insurance (including broad form
flood, broad form earthquake and comprehensive boiler and machinery
coverages) on each Building and the contents therein of the Borrower,
REA or such Guarantor and their respective Subsidiaries in an amount
not less than one hundred percent (100%) of the full replacement cost
of each such Building and the contents therein determined no less
frequently than every 24 months by an insurer, or, if not so determined
by the insurer, by a qualified appraiser selected and paid for by the
Borrower, REA or such Guarantor and acceptable to the Agent, or such
other limit as the Agent may approve, with deductibles not to exceed
$100,000 for any one occurrence, with a replacement cost coverage
endorsement, an agreed amount endorsement, and, if requested by the
Agent, a contingent liability from operation of building laws
endorsement, a demolition cost endorsement and an increased cost of
construction endorsement in such amounts as the Agent may require. Full
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replacement cost as used in this Section 7.7 means the cost of
replacing a Building (exclusive of the cost of excavations, foundations
and footings below the lowest basement floor) and the contents therein
without deduction for physical depreciation thereof;
(ii) during the course of construction or repair of any
Building, the insurance required by clause (i) above shall be written
on a builders risk, completed value, non-reporting form, meeting all of
the terms required by clause (i) above, covering the total value of
work performed, materials, equipment, machinery and supplies furnished,
existing structures, and temporary structures being erected on or near
the Mortgaged Property, including coverage against collapse and damage
during transit or while being stored off-site, and containing a soft
costs (including loss of rents) coverage endorsement and a permission
to occupy endorsement;
(iii) flood insurance if at any time any Building is located
in any federally designated "special hazard area" (including any area
having special flood, mudslide and/or flood-related erosion hazards,
and shown on a Flood Hazard Boundary Map or a Flood Insurance Rate Map
published by the Federal Emergency Management Agency as Zone A, AO,
Al-30, AE, A99, AH, VO, Vl-30, VE, V, M or E) and the broad form flood
coverage required by clause (i) above is not available, in an amount
equal to the full replacement cost or the maximum amount then available
under the National Flood Insurance Program;
(iv) rent loss insurance in an amount sufficient to recover at
least the total estimated gross receipts from all sources of income,
including without limitation, rental income, for the Mortgaged Property
for a twelve month period;
(v) commercial general liability insurance against claims for
personal injury (to include, without limitation, bodily injury and
personal and advertising injury) and property damage liability, all on
an occurrence basis, if commercially available, with such coverages as
the Agent may reasonably request (including, without limitation,
contractual liability coverage, completed operations coverage for a
period of two years following completion of construction of any
improvements on the Mortgaged Property, and coverages equivalent to an
ISO broad form endorsement), with a general aggregate limit of not less
than $2,000,000, a completed operations aggregate limit of not less
than $2,000,000 and a combined single "per occurrence" limit of not
less than $1,000,000 for bodily injury, property damage and medical
payments;
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(vi) during the course of construction or repair of any
improvements on the Mortgaged Property, owner's contingent or
protective liability insurance covering claims not covered by or under
the terms or provisions of the insurance required by clause (v) above;
(vii) employers liability insurance;
(viii) umbrella liability insurance with limits of not less
than $25,000,000 to be in excess of the limits of the insurance
required by clauses (v), (vi) and (vii) above, with coverage at least
as broad as the primary coverages of the insurance required by clauses
(v), (vi) and (vii) above, with any excess liability insurance to be at
least as broad as the coverages of the lead umbrella policy. All such
policies shall be endorsed to provide defense coverage obligations;
(ix) workers' compensation insurance for all employees of the
Borrower, REA or such Guarantor or their respective Subsidiaries
engaged on or with respect to the Mortgaged Property; and
(x) such other insurance in such form and in such amounts as
may from time to time be reasonably required by the Agent against other
insurable hazards and casualties which at the time are commonly insured
against in the case of properties of similar character and location to
the Real Estate.
The Borrower, REA or the applicable Guarantor shall pay all premiums on
insurance policies. The insurance policies with respect to all Mortgaged
Property provided for in clauses (v), (vi) and (viii) above shall name the Agent
and each Lender as an additional insured and shall contain a cross liability/
severability endorsement. The insurance policies provided for in clauses (i),
(ii), (iii) and (iv) above shall name the Agent as mortgagee and loss payee,
shall be first payable in case of loss to the Agent, and shall contain mortgage
clauses and lender's loss payable endorsements in form and substance reasonably
acceptable to the Agent. The Borrower shall deliver duplicate originals or
certified copies of all such policies to the Agent, and the Borrower shall
promptly furnish to the Agent all renewal notices and evidence that all premiums
or portions thereof then due and payable have been paid. At least 30 days prior
to the expiration date of the policies, the Borrower shall deliver to the Agent
evidence of continued coverage, in the form of a certificate of insurance
satisfactory to the Agent.
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(a) All policies of insurance required by this Agreement shall
contain clauses or endorsements to the effect that (i) no act or omission of the
Borrower, REA or any Guarantor or any or their respective Subsidiaries or anyone
acting for the Borrower, REA, any Guarantor or any such Subsidiary (including,
without limitation, any representations made in the procurement of such
insurance), which might otherwise result in a forfeiture of such insurance or
any part thereof, no occupancy or use of the Mortgaged Property for purposes
more hazardous then permitted by the terms of the policy, and no foreclosure or
any other change in title to the Mortgaged Property or any part thereof, shall
affect the validity or enforceability of such insurance insofar as the Agent is
concerned, (ii) the insurer waives any right of setoff, counterclaim,
subrogation, or any deduction in respect of any liability of the Borrower, REA,
any Guarantor, any such Subsidiary, the Agent and the Lenders, (iii) such
insurance is primary and without right of contribution from any other insurance
which may be available, (iv) such policies shall not be modified, canceled or
terminated prior to the scheduled expiration date thereof without the insurer
thereunder giving at least thirty (30) days prior written notice to the Agent,
and (v) the Agent or the Lenders shall not be liable for any premiums thereon or
subject to any assessments thereunder, and such insurance shall in all events be
in amounts sufficient to avoid any coinsurance liability.
(b) The insurance required by this Agreement may be effected
through a blanket policy or policies covering all Real Estate of the Borrower,
REA, any Guarantor or any of their respective Subsidiaries not included in the
Collateral and shall be in amount equal to the replacement cost of all Buildings
located on such Real Estate, provided that such blanket policy or policies
comply with all of the terms and provisions of this Section 7.7 and contain
endorsements or clauses assuring that any claim recovery will not be less than
that which a separate policy would provide, including, without limitation, an
aggregate limits of insurance endorsement in the case of liability insurance.
(c) All policies of insurance required by this Agreement shall
be issued by companies licensed to do business in the State where the policy is
issued and also in the states where the Real Estate is located and having a
rating in Best's Key Rating Guide of at least "A" and a financial size category
of at least "VIII".
(d) Neither the Borrower, REA, any Guarantor nor any of their
respective Subsidiaries shall carry separate insurance, concurrent in kind or
form or contributing in the event of loss, with any insurance required under
this Agreement unless such insurance complies with the terms and provisions of
this Section 7.7.
(e) In the event of any loss or damage to the Mortgaged
Property, the Borrower, REA or the applicable Guarantor shall give prompt
written notice to the insurance
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carrier and the Agent, and the Agent shall furnish a copy of such notice
promptly to each of the Lenders. Each of the Borrower, REA and the Guarantors
hereby irrevocably authorizes and empowers the Agent, at the Agent's option and
in the Agent's sole discretion or at the request of the Majority Lenders in
their sole discretion, as its attorney in fact, to make proof of such loss, to
adjust and compromise any claim under insurance policies, to appear in and
prosecute any action arising from such insurance policies, to collect and
receive Insurance Proceeds, and to deduct therefrom the Agent's expenses
incurred in the collection of such Insurance Proceeds; provided, however, that
so long as no Default or Event of Default has occurred and is continuing and so
long as the Borrower, REA or any Guarantor shall in good faith diligently pursue
such claim, the Borrower, REA or such Guarantor may make proof of loss and
appear in any proceedings or negotiations with respect to the adjustment of such
claim, except that the Borrower, REA or such Guarantor may not settle, adjust or
compromise any such claim without the prior written consent of the Agent, which
consent shall not be unreasonably withheld or delayed; provided, further, that
the Borrower, REA or such Guarantor may make proof of loss and adjust and
compromise any claim under casualty insurance policies which is in an amount
less than $500,000 so long as no Default or Event of Default has occurred and is
continuing and so long as the Borrower, REA or such Guarantor shall in good
faith diligently pursue such claim. The Borrower, REA and each Guarantor further
authorize the Agent, at the Agent's option, to (i) apply the balance of such
Insurance Proceeds to the payment of the Obligations whether or not then due, or
(ii) if the Agent shall require the reconstruction or repair of the Mortgaged
Property, to hold the balance of such proceeds as trustee to be used to pay
taxes, charges, sewer use fees, water rates and assessments which may be imposed
on the Mortgaged Property and the Obligations as they become due during the
course of reconstruction or repair of the Mortgaged Property and to reimburse
the Borrower, REA or such Guarantor, in accordance with such terms and
conditions as the Agent may prescribe, for the costs of reconstruction or repair
of the Mortgaged Property, and upon completion of such reconstruction or repair
to apply any excess to the payment of the Obligations. Notwithstanding the
foregoing, the Agent shall make such net Insurance Proceeds available to the
Borrower, REA or such Guarantor to reconstruct and repair the Mortgaged
Property, in accordance with such terms and conditions as the Agent may
prescribe in the Agent's discretion for the disbursement of the proceeds,
provided that (i) the cost of such reconstruction or repair is not estimated by
the Agent to exceed twenty five percent (25%) of the replacement cost of the
damaged Building (as reasonably estimated by the Agent), (ii) no Event of
Default shall have occurred and be continuing, (iii) the Borrower, REA or such
Guarantor shall have provided to the Agent additional cash security in an amount
equal to the amount reasonably estimated by the Agent to be the amount in excess
of such proceeds which will be required to complete such repair or restoration,
(iv) the Agent shall have approved the plans and specifications, construction
budget, construction contracts, and construction schedule for such repair or
restoration and reasonably determined that the repaired or restored Mortgaged
Property will provide the Agent with adequate security for the Obligations
(provided that the Agent shall not disapprove such plans and specifications if
the Building is to be restored to its condition
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immediately prior to such damage), (v) the Borrower, REA or such Guarantor shall
have delivered to the Agent written agreements binding upon not less than
seventy-five percent (75%) of the tenants or other parties having present or
future rights to possession of any portion of the affected Mortgaged Property or
having any right to require repair, restoration or completion of the Mortgaged
Property or any portion thereof, agreeing upon a date for delivery of possession
of the Mortgaged Property or their respective portions thereof, to permit time
which is sufficient in the judgment of the Agent for such repair or restoration
and approving the plans and specifications for such repair or restoration, or
other evidence satisfactory to the Agent that none of such tenants or other
parties may terminate their Leases as a result of such casualty or as a result
of having a right to approve the plans and specifications for such repair or
restoration (it being agreed that the foregoing percentage of seventy-five
percent (75%) shall be determined by reference to those tenants in the aggregate
occupying or having rights to occupy not less than seventy-five percent (75%) of
the Net Rentable Area of the Building so damaged), (vi) the Agent shall
determine that such repair or reconstruction can be completed prior to the
Maturity Date, (vii) the Agent shall receive evidence reasonably satisfactory to
it that any such restoration, repair or rebuilding complies in all respects with
any and all applicable state, federal and local laws, ordinances and
regulations, including without limitation, zoning laws, ordinances and
regulations, and that all required permits, licenses and approvals relative
thereto have been or will be issued in a manner so as not to impede the progress
of restoration, and (viii) the Agent shall receive evidence reasonably
satisfactory to it that the insurer under such policies of fire or other
casualty insurance does not assert any defense to payment under such policies
against the Borrower, REA, any Guarantor or the Agent. Any excess Insurance
Proceeds shall be paid to the Borrower, or if an Event of Default has occurred
and is continuing, such proceeds shall be applied to the payment of the
Obligations, unless in either case by the terms of the applicable insurance
policy the excess proceeds are required to be returned to such insurer. In no
event shall the provisions of this Section be construed to extend the Maturity
Date or to limit in any way any right or remedy of the Agent upon the occurrence
of an Event of Default hereunder. If the Mortgaged Property is sold or the
Mortgaged Property is acquired by the Agent, all right, title and interest of
the Borrower, REA and any Guarantor in and to any insurance policies and
unearned premiums thereon and in and to the proceeds thereof resulting from loss
or damage to the Mortgaged Property prior to the sale or acquisition shall pass
to the Agent or any other successor in interest to the Borrower or purchaser of
the Mortgaged Property.
(f) The Borrower, REA and each and Guarantor will require any
general contractor to obtain and maintain at all times during the construction
of any improvements to the Mortgaged Property the insurance required by the
general contractor's contract approved by the Agent and such other insurance as
may be reasonably required by the Agent (including, without limitation,
commercial general liability insurance, comprehensive automobile liability
insurance, all-risk contractor's equipment floater insurance, workmen's
compensation insurance and employer liability insurance). The Borrower, REA and
each and Guarantor will require its
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architect, engineer and any other design professional providing design or
engineering services in connection with the construction of any improvements to
the Mortgaged Property to obtain and maintain professional liability insurance
covering any claims asserted with respect to the Mortgaged Property for such
period of time as the Agent may reasonably approve. All such insurance required
by this paragraph shall be in such amounts and form, to include such coverage
and endorsements, and to be issued by such insurers as shall be approved by the
Agent, and to contain the written agreement of the insurer to give the Agent
thirty (30) days prior written notice of cancellation, nonrenewal, modification
or expiration. The Borrower, REA and each Guarantor will provide or will cause
its general contractor or design professional to provide the Agent with
certificates evidencing such insurance upon the request of the Agent.
(g) The Borrower, REA and the Guarantors will, and will cause
each of their respective Subsidiaries to, at their expense, procure and maintain
insurance covering the Real Estate other than the Collateral in such amounts and
against such risks and casualties as are customary for properties of similar
character and location, due regard being given to the type of improvements
thereon, their construction, location, use and occupancy.
(h) The Borrower, REA and the Guarantors will provide to the
Agent for the benefit of the Lenders Title Policies for all of the Mortgaged
Properties of such Person. Each Title Policy shall also contain, to the extent
available, a tie-in endorsement aggregating the insurance coverage provided
under all of the policies issued by the same title insurance company relating to
the Borrower, REA and each Guarantor.
Section 7.8 TAXES. The Borrower, REA and the Guarantors will, and will
cause their respective Subsidiaries to, duly pay and discharge, or cause to be
paid and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges imposed upon them or upon the
Mortgaged Properties or the other Real Estate, sales and activities, or any part
thereof, or upon the income or profits therefrom, PROVIDED that any such tax,
assessment, charge or levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
which shall suspend the collection thereof with respect to such property,
neither such property nor any portion thereof or interest therein would be in
any danger of sale, forfeiture or loss by reason of such proceeding and the
Borrower, REA, any such Guarantor or any such Subsidiary shall have set aside on
its books adequate reserves in accordance with GAAP; and PROVIDED, FURTHER, that
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor, the Borrower, REA, any such Guarantor or any
such Subsidiary either (i) will provide a bond issued by a surety reasonably
acceptable to the Agent and sufficient to stay all such proceedings or (ii) if
no such bond is provided, will pay each such tax, assessment, charge or levy.
Section 7.9 INSPECTION OF PROPERTIES AND BOOKS. The Borrower, REA and
the Guarantors will, and will cause their respective Subsidiaries to, permit the
Lenders, through the Agent or any
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representative designated by the Agent, at the Borrower's expense and upon
reasonable prior notice to visit and inspect any of the properties of the
Borrower, REA, each Guarantor or any of their respective Subsidiaries, to
examine the books of account of the Borrower, REA, each Guarantor and their
respective Subsidiaries (and to make copies thereof and extracts therefrom) and
to discuss the affairs, finances and accounts of the Borrower, REA, any
Guarantor and their respective Subsidiaries with, and to be advised as to the
same by, their respective officers, all at such reasonable times and intervals
as the Agent or any Lender may reasonably request. The Lenders shall use good
faith efforts to coordinate such visits and inspections so as to minimize the
interference with and disruption to the normal business operations of the
Borrower, REA, the Guarantors and their respective Subsidiaries.
Section 7.10 COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS.
The Borrower, REA and the Guarantors will, and will cause each of their
respective Subsidiaries to, comply in all respects with (i) all applicable laws
and regulations now or hereafter in effect wherever its business is conducted,
including all Environmental Laws, (ii) the provisions of its corporate charter,
partnership agreement, limited liability company agreement or declaration of
trust, as the case may be, and other charter documents and bylaws, (iii) all
agreements and instruments in all material respects to which it is a party or by
which it or any of its properties may be bound, (iv) all applicable decrees,
orders, and judgments, and (v) all licenses and permits required by applicable
laws and regulations for the conduct of its business or the ownership, use or
operation of its properties. If any authorization, consent, approval, permit or
license from any officer, agency or instrumentality of any government shall
become necessary or required in order that the Borrower, REA, any Guarantor or
their respective Subsidiaries may fulfill any of its obligations hereunder, the
Borrower, REA, such Guarantor or such Subsidiary will immediately take or cause
to be taken all steps necessary to obtain such authorization, consent, approval,
permit or license and furnish the Agent and the Lenders with evidence thereof.
Section 7.11 FURTHER ASSURANCES. The Borrower, REA and each Guarantor
will and will cause each of their respective Subsidiaries to, cooperate with the
Agent and the Lenders and execute such further instruments and documents as the
Lenders or the Agent shall reasonably request to carry out to their satisfaction
the transactions contemplated by this Agreement and the other Loan Documents.
Section 7.12 INTENTIONALLY OMITTED.
Section 7.13 MANAGEMENT.
(a) There shall not occur, without the prior written consent
of the Majority Lenders, any material change in any unaffiliated third party
management of the Mortgaged Properties (including, without limitation, the
hiring or termination of any unaffiliated third party property manager).
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(b) Each of the Borrower, REA and each Guarantor shall have
the right to cause its Mortgaged Property to be managed pursuant to a Management
Agreement that (i) is with a property manager which is not an Affiliate and
which has been approved by the Agent, and (ii) contains provisions reasonably
satisfactory to the Agent, including with respect to compensation of the
property manager, subordination of management fees, termination rights and
exercise by the Agent of its remedies under the Loan Documents following an
Event of Default. Neither the Borrower, REA nor any Guarantor shall directly or
indirectly enter into any Management Agreement or similar agreement delegating
to another Person which is not an Affiliate substantial authority over the
leasing, maintenance or operation of any Mortgaged Property other than as
aforesaid.
Section 7.14 LEASES OF THE PROPERTY. Neither the Borrower, REA nor any
Guarantor will lease all or any portion of a Mortgaged Property or amend,
supplement or otherwise modify, terminate or cancel, or accept the surrender of,
or consent to the assignment or subletting of, or grant any concessions to or
waive the performance of any obligations of any tenant, lessee or licensee
under, any now existing or future Lease without the prior written consent of the
Agent; provided, however, with respect to any Lease which covers less than the
lesser of 20,000 square feet or five percent (5%) of the aggregate Net Rentable
Area of the Mortgaged Properties, the Borrower, REA or any Guarantor may amend,
supplement or otherwise modify, terminate or cancel, or accept the surrender of,
or consent to the assignment or subletting of, or granting concessions to or
waive the performance of any obligations of any tenant, lessee or licensee under
any such Lease in the ordinary course of business consistent with sound leasing
and management practices for similar properties. The Borrower, at the Agent's
request, shall furnish the Agent with executed copies of all Leases hereafter
made. Within 30 days from the date hereof, the Borrower will submit to the Agent
a form lease for use for office properties and a form lease for industrial
properties (collectively, the "Form Lease") for the Mortgaged Properties, which
shall be reasonably satisfactory to the Agent and shall thereafter be utilized
in connection with all leasing of space at the Mortgaged Properties. Upon the
Agent's request, the Borrower, REA and each Guarantor shall make a separate and
distinct assignment to the Agent as additional security, of all Leases hereafter
made. Notwithstanding the foregoing, following the Agent's approval of the
"Leasing Parameters" (as hereinafter defined) for a Mortgaged Property, the
Borrower, REA or any Guarantor may, without the prior approval of the Agent,
enter into any Lease provided that the Lease covers less than the lesser of
20,000 square feet or five percent (5%) of the aggregate Net Rentable Area of
the Mortgaged Properties, is a bona fide arm's length lease entered into in the
ordinary course of business with a party which is not an Affiliate of the
Borrower, REA or any Guarantor, falls within the Leasing Parameters and is on
the Form Lease (without material modification or addition). Any Lease submitted
to the Agent for approval shall be deemed approved by the Agent unless the Agent
expressly disapproves the same by written notice delivered to the Borrower
(which shall state the reasons for disapproval) within five (5) Business Days
after the date of the delivery of such Lease to the Agent for approval and all
other
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information reasonably requested by the Agent in order to make such
determination. As used herein, "Leasing Parameters" means leasing parameters for
a Mortgaged Property approved by the Agent. Leasing Parameters shall include,
without limitation, the minimum and maximum term, the minimum rent, tax and
operating stops, tenant standard improvements, tenant allowances and other
tenant inducements and leasing commissions, and shall be approved by the Agent
prior to the commencement of each calendar year during the term of the Notes.
The Agent agrees to provide a Subordination, Attornment and Nondisturbance
Agreement for the tenant under any Lease that covers more than the lesser of
20,000 square feet or five (5%) of the aggregate Net Rentable Area of the
Mortgaged Properties as requested by the Borrower, provided that (a) such tenant
is not an Affiliate of the Borrower, REA or any Guarantor, (b) the Lease is on
the Form Lease (without modifications or additions), (c) the Lease falls within
the Leasing Parameters, and (d) the terms of the Subordination, Attornment and
Nondisturbance Agreement are otherwise acceptable to the Agent. The Agent shall
provide a Subordination, Attornment and Nondisturbance Agreement with respect to
each other Lease that is approved by the Agent provided that the terms of the
Subordination, Attornment and Nondisturbance Agreement are acceptable to the
Agent.
Section 7.15 FUNDAMENTAL CHANGES OF BORROWER. Each of the Borrower, REA
and each Guarantor: (a) does not own and will not own or lease any encumbered
asset other than (i) the Mortgaged Properties and incidental personal property
necessary for the operation of the Mortgaged Properties (which will only be
encumbered by liens in favor of the Agent), and (ii) other properties as
permitted by Section 8.2(ii), Section 8.2(iv), Section 8.2(v) and Section
8.2(viii); (b) is not engaged and will not engage in any business other than the
ownership, management or leasing of the Mortgaged Properties and Investments
permitted pursuant to Section 8.3; (c) except for those agreements described on
Schedule 6.15, has not entered and will not enter into any contract or agreement
with any of its general partners, principals or Affiliates or any Affiliate of
any such general partner except upon terms and conditions that are intrinsically
fair and substantially similar to those that would be available on an
arms-length basis with third parties other than an Affiliate; (d) has not made
and will not make any loans or advances to any third party (including any
Affiliate (other than (i) the loan evidenced by the promissory note described in
Section 8.1(j) and (ii) loans made by Borrower to American Real Estate
Management, Inc. ("Management Inc."), to provide operating funds for the
continued operation of Management Inc.; provided, however, such loans to
Management Inc. shall not exceed the aggregate amount of general and
administrative expenses incurred by both Borrower and REA plus $2,500,000.00);
(e) is and will be solvent and pay its debt from its assets as the same shall
become due; (f) will not, nor will any partner, limited or general, or
shareholder thereof, amend, modify or otherwise change its partnership
certificate, partnership agreement, limited liability company agreement,
articles of incorporation or by-laws, except in connection with the admission of
new limited partners in the Borrower in accordance with the terms of this
Agreement, or such other amendments, modifications or changes to such
organizational documents which do not adversely affect the
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Lenders or their rights hereunder; (g) will conduct and operate its business
substantially as presently conducted and operated and in compliance with the
terms and conditions of this Agreement; (h) will maintain books and records and
accounts separate from those of its Affiliates, including its general partners;
(i) will be, and at all times will hold itself out to the public as, a legal
entity separate and distinct from any other entity (including any Affiliate
thereof, including any general partner or any Affiliate of any general partner
of the Borrower, REA or any Guarantor); (j) will file its own tax returns; (k)
will maintain adequate capital for the normal obligations reasonably foreseeable
in a business of its size and character and in light of its contemplated
business operations; (l) will not seek the dissolution or winding up, in whole
or in part, of the Borrower, REA or any Guarantor; (m) will not commingle the
funds and other assets of the Borrower, REA or any Guarantor with those of any
general partner, any Affiliate or any other Person; (n) has and will maintain
its assets in such a manner that it is not costly or difficult to segregate,
ascertain or identify their respective individual assets from those of any
affiliate or any other person; and (o) except as contemplated hereunder, does
not and will not hold itself out to be responsible for the debts or obligations
of any other person.
Section 7.16 REGISTERED SERVICEMARK. Without the prior written consent
of the Agent, none of the Mortgaged Properties shall be owned or operated by the
Borrower, REA or any Guarantor under any registered or protected trademark,
tradename, servicemark or logo. Without limiting the foregoing, the Agent may
condition its consent to the use of any of the foregoing upon the granting to
the Agent for the benefit of the Lenders of a perfected first priority security
interest therein.
Section 7.17 OWNERSHIP OF REAL ESTATE. All Real Estate and all
interests (whether direct or indirect) of REA, the Borrower, the Guarantors and
any of their respective Subsidiaries in income-producing real estate assets now
owned or leased or acquired or leased after the Closing Date shall be owned or
leased directly by the Borrower; PROVIDED, however that (i) subject to the
restrictions contained in Section 8.3, the Borrower shall be permitted to own or
lease interests in Real Estate together with other third party joint venture
partners; (ii) Real Estate which is encumbered by Non-recourse Indebtedness of
the type described in Section 8.1 (f) or Section 8.1(h) may be owned or leased
by the Borrower or any of its Subsidiaries; and (iii) the Subsidiaries of the
Borrower or REA listed on Schedule 7.17 hereto may own or lease the Real Estate
described therein.
Section 7.18 INTENTIONALLY OMITTED.
Section 7.19 CHANGE IN CONTROL. The Borrower and REA covenant and agree
that: (i) REA will at all times (a) be the sole general partner of the Borrower,
(b) own the largest percentage interest of any partner in the Borrower and (c)
be responsible for making all day-to-day operational and management decisions to
be made by the Borrower in the conduct of its business and (ii) each Guarantor
will be and remain a wholly owned subsidiary of the Borrower, except
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for Virginia Street Associates Limited Partnership ("Virginia"), as to which a
0.1% limited partnership interest may continue to be owned by Gail Mulvihill.
Section 7.20 INTENTIONALLY OMITTED.
Section 7.21 REIT STATUS. Subject to the terms of Section 8.7, REA
shall at all times comply with all requirements of applicable laws and
regulations necessary to maintain REIT Status.
Section 7.22 MAINTENANCE OF PROPERTY; REPAIR; ALTERATIONS. Each of the
Borrower, REA and each Guarantor (i) shall maintain or cause to be maintained
its Mortgaged Property and all other items of its Collateral in good condition
and repair, reasonable wear and tear excepted, (ii) except to the extent
required by any Lease, shall not remove, demolish or structurally alter, or
permit or suffer the removal, demolition or structural alteration of, any
Buildings except with the prior written consent of the Agent which consent shall
not be unreasonably withheld, conditioned or delayed, (iii) shall complete any
Buildings which may be now or hereafter constructed on any Mortgaged Property
and restore in like manner any portion of the Buildings which may be damaged or
destroyed thereof from any cause whatsoever, and pay when due all claims for
labor performed and materials furnished therefor, (iv) shall comply in all
material respects with all applicable requirements of insurance policies
required hereunder and all covenants, conditions and restrictions now or
hereafter affecting its Mortgaged Property or any other item of Collateral or
any part thereof or requiring any alterations or improvements, (v) shall not
commit, suffer or permit any act to be done in or upon the Collateral in
violation of any applicable law, (vi) except to the extent required by any
Lease, shall not remove any item of the Collateral without replacing it with a
comparable item of equal or greater quality, value and usefulness except for
sales in the ordinary course of business of property which is obsolete or no
longer useful, (vii) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements of its Mortgaged Property and all
other items of Collateral in all cases in which the failure so to do would have
a material adverse effect on the condition of the applicable Mortgaged Property
or Collateral or on the financial condition, assets or operations of the
Borrower, REA, each Guarantor and their respective Subsidiaries and (viii) will
cause all of their respective properties and those of their respective
Subsidiaries used or useful in the conduct of their respective business or the
business of their respective Subsidiaries to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted) and
supplied with all necessary equipment.
Section 7.23 PAYMENT OF LIENS.
(a) In the event that, notwithstanding the covenants contained
in Section 8.2, a lien not otherwise permitted under Section 8.2 may encumber
any Mortgaged Property or Collateral or any portion thereof, the Borrower shall
promptly discharge such lien or cause such lien to be discharged by payment to
the lienor or lien claimant or promptly secure removal of such lien by
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bonding or deposit with the country clerk or otherwise or, at the Agent's
option, promptly obtain insurance against, any such lien within thirty (30) days
after the receipt of written notice thereof. The Borrower shall make available
to the Agent upon request all receipts or other evidence satisfactory to the
Agent of payment of taxes, assessments, liens or any other item which may cause
any such lien to be filed against any Mortgaged Property or Collateral. The
Borrower shall fully preserve the liens and the priority of the Mortgages
without cost or expense to the Agent.
(b) If the Borrower fails to promptly discharge or remove any
such lien described in paragraph (a) of this Section 7.23 within thirty (30)
days after the receipt of written notice thereof, then the Agent may, but shall
not be required to, procure the release and discharge of such lien, and any
judgment or decree thereon, and in furtherance thereof may, in its sole
discretion, effect any settlement or compromise with the lienor or lien claimant
or post any bond or furnish any security or indemnity as the Agent, in its sole
discretion, may elect. In settling, compromising or arranging for the discharge
of any liens under this subsection, the Agent shall not be required to establish
or confirm the validity or amount of the lien. The Borrower agrees that all
costs and expenses expended or otherwise incurred pursuant to this Section
(including reasonable attorneys' fees and disbursements) by the Lender shall be
paid by the Borrower in accordance with the terms hereof.
(c) In the event that the Agent reasonably suspects that a
lien not otherwise permitted under Section 8.2 may encumber any Mortgaged
Property or Collateral or any portion thereof, the Agent may, at the expense of
the Borrower, obtain an updated title and/or lien search regarding such
Mortgaged Property or Collateral; provided that if no such lien not otherwise
permitted hereunder is revealed by such updated title or lien search, the
Borrower shall have no obligation to pay for or reimburse the Agent in respect
of, such title or lien search.
Section 7.24 DISTRIBUTIONS OF INCOME TO THE BORROWER. The Borrower
shall cause all of its Subsidiaries to promptly distribute to the Borrower (but
not less frequently than once each fiscal quarter of the Borrower, unless
otherwise approved by the Agent), whether in the form of dividends,
distributions or otherwise, all profits, proceeds or other income relating to or
arising from its Subsidiaries' use, operation, financing, refinancing, sale or
other disposition of their respective assets and properties after (a) the
payment by each Subsidiary of its Debt Service and Operating Expenses for such
quarter and (b) the establishment of reasonable reserves for the payment of
Operating Expenses not paid on at least a quarterly basis and capital
improvements to be made to such Subsidiary's assets and properties approved by
such Subsidiary in the ordinary course of business consistent with its past
practices.
Section 7.25 LIMITING AGREEMENTS. Should the Borrower, REA, the
Guarantors or any of their respective Subsidiaries enter into or modify any
agreements or documents pertaining to any existing or future Indebtedness
permitted by Section 8.1(k), which agreements or documents include covenants
(whether affirmative or negative), warranties, defaults or events of default (or
any
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other provision which may have the same practical effect as any of the
foregoing) which are individually or in the aggregate more restrictive against
the Borrower, the Guarantors or their respective Subsidiaries than those set
forth herein or in any of the other Loan Documents, the Borrower shall promptly
notify the Agent and, if requested by the Agent or the Majority Lenders, the
Borrower, the Agent, and the Lenders shall promptly amend this Agreement and the
other Loan Documents to include some or all of such more restrictive provisions
as determined by the Agent or the Majority Lenders in their sole discretion, and
the Borrower shall cause REA and the Guarantors to consent to such amendment.
Notwithstanding the foregoing, this Section 7.25 shall not apply to covenants
(whether affirmative or negative), warranties, defaults or events of default (or
any other provision which may have the same practical effect as any of the
foregoing) contained in any agreements or documents evidencing or securing
recourse Indebtedness that relate only to specific Real Estate that is
collateral for such Indebtedness.
Section 8 NEGATIVE COVENANTS.
Each of the Borrower and REA covenants and agrees that, so long as any
Loan or Note is outstanding or any of the Lenders has any obligation to make any
Loans:
Section 8.1 RESTRICTIONS ON INDEBTEDNESS. Subject to the further
limitations contained in this Section 8.1, the Borrower, REA and the Guarantors
will not, and will not permit their respective Subsidiaries to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
(a) Indebtedness to the Lenders arising under any of the Loan
Documents;
(b) current liabilities of the Borrower, REA, the Guarantors
or their respective Subsidiaries incurred in the ordinary course of business but
not incurred through (i) the borrowing of money, or (ii) the obtaining of credit
except for credit on an open account basis customarily extended and in fact
extended in connection with normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and supplies to
the extent that payment therefor shall not at the time be required to be made in
accordance with the provisions of Section 7.8;
(d) Indebtedness in respect of judgments or awards for so long
as the existence of same is not an Event of Default under Section 12.1A(k);
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary course
of business;
(f) subject to the provisions of Section 9, Non-recourse
Indebtedness; PROVIDED that (i) no such Non-recourse Indebtedness shall be
incurred unless the Borrower shall have provided
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to the Lenders a statement that no Default or Event of Default exists and a
Compliance Certificate demonstrating compliance with the covenants referred to
therein after giving effect to such incurrence, (ii) such Non-recourse
Indebtedness has a maturity date that is not sooner than 180 days after the
Maturity Date; provided, that this clause (ii) shall not apply to Non-recourse
Indebtedness secured by a lien on Real Estate which was proposed for inclusion
in the Collateral pursuant to Section 5.3 but not accepted by the Majority
Lenders in accordance with Section 5.3;
(g) [INTENTIONALLY OMITTED]
(h) subject to the provisions of Section 9, Non-recourse
Indebtedness that is assumed by the Borrower or a Subsidiary of the Borrower in
connection with the acquisition of Real Estate;
(i) Indebtedness in respect of reverse repurchase agreements
having a term of not more than 180 days with respect to Investments described in
Section 8.3(d) or (e);
(j) that certain promissory note issued by REA to the Borrower
in the amount of $10,000,000; and
(k) subject to the provisions of Section 9, recourse
Indebtedness (other than the Loans) in an aggregate principal amount not to
exceed ten percent (10%) of Consolidated Total Assets of REA; provided that (i)
no such recourse Indebtedness shall be incurred unless the Borrower shall have
provided to Lenders a statement that no Default or Event of Default exists and a
Compliance Certificate demonstrating compliance with the covenants referred to
therein after giving effect to such incurrence, and (ii) such recourse
Indebtedness bears a maturity date that is not sooner than 180 days after the
Maturity Date; provided, however, this Section 8.1(k)(ii) shall not apply to
recourse Indebtedness incurred (a) in connection with the construction or
development of projects owned by Borrower, REA, the Guarantors or their
respective subsidiaries or (b) in connection with deposits made for purchases in
the ordinary course of business.
Section 8.2 RESTRICTIONS ON LIENS, ETC. The Borrower, REA and the
Guarantors will not, and will not permit their respective Subsidiaries to (a)
create or incur or suffer to be created or incurred or to exist any lien,
security title, encumbrance, mortgage, pledge, negative pledge, charge,
restriction or other security interest of any kind upon any of their respective
property or assets of any character whether now owned or hereafter acquired, or
upon the income or profits therefrom; (b) transfer any of any of their property
or assets or the income or profits therefrom for the purpose of subjecting the
same to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (c) acquire, or agree or have an
option to acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement; (d)
suffer to exist for a period of more than thirty (30) days after the same shall
have been incurred any Indebtedness or claim or demand
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against any of them that if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over any of their
general creditors; (e) sell, assign, pledge or otherwise transfer any accounts,
contract rights, general intangibles, chattel paper or instruments, with or
without recourse; or (f) incur or maintain any obligation to any holder of
Indebtedness of the Borrower, REA, any Guarantor or any such Subsidiary which
prohibits the creation or maintenance of any lien securing the Obligations;
PROVIDED that the Borrower, REA, the Guarantors and any such Subsidiary may
create or incur or suffer to be created or incurred or to exist:
(i) liens on properties to secure taxes, assessments and other
governmental charges or claims for labor, material or supplies in
respect of obligations not overdue;
(ii) liens on Real Estate other than the Mortgaged Property or
any interest therein (including the rents, issues and profits
therefrom) in respect of Indebtedness which is permitted by
Section 8.1(d), Section 8.1(f), Section 8.1(h) or Section 8.1(k);
(iii) liens on Real Estate other than the Mortgaged Properties
or any interest therein in respect of judgments or awards for so long
as the existence of the same is not an Event of Default under
Section 12.1A.(k);
(iv) encumbrances on properties other than the Mortgaged
Property consisting of easements, rights of way, zoning restrictions,
restrictions on the use of real property and defects and irregularities
in the title thereto, landlord's or lessor's liens under leases to
which the Borrower, REA, the Guarantors or any such Subsidiary is a
party, and other minor non-monetary liens or encumbrances none of which
interferes materially with the use of the property affected in the
ordinary conduct of the business of the Borrower, REA, the Guarantors
or any such Subsidiary, which defects do not individually or in the
aggregate have a materially adverse effect on the business of the
Borrower, REA or the Guarantors individually or of the Borrower, REA or
the Guarantors and their respective Subsidiaries on a consolidated
basis;
(v) liens on Short-term Investments securing Indebtedness
permitted by Section 8.1(h);
(vi) liens in favor of the Agent and the Lenders under the
Loan Documents;
(vii) liens and encumbrances on a Mortgaged Property expressly
permitted under the terms of the Mortgage relating thereto; and
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(viii) equipment leases of personal property in connection
with the operation of its Real Estate in the ordinary course of
business.
Section 8.3 RESTRICTIONS ON INVESTMENTS. The Borrower, REA and the
Guarantors will not, and will not permit any of their respective Subsidiaries
to, make or permit to exist or to remain outstanding any Investment except
Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of purchase by
the Borrower, REA, any Guarantor or any such Subsidiary;
(b) marketable direct obligations of any of the following:
Federal Home Loan Mortgage Corporation, Student Loan Marketing Association,
Federal Home Loan Banks, Federal National Mortgage Association, Government
National Mortgage Association, Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Financing Banks, Export-Import Bank of the United States,
Federal Land Banks, or any other agency or bank of the United States of America;
(c) demand deposits, certificates of deposit, bankers
acceptances and time deposits of any of the Lenders or any United States banks
having total assets in excess of $100,000,000; PROVIDED, HOWEVER, that the
aggregate amount at any time so invested with any single bank having total
assets of less than $1,000,000,000 will not exceed $1,000,000;
(d) securities commonly known as "commercial paper" issued by
any Lender, or by a corporation organized and existing under the laws of the
United States of America or any State which at the time of purchase are rated by
Moody's Investors Service, Inc. or by Standard & Poor's Corporation at not less
than "P 1" if then rated by Moody's Investors Service, Inc., and not less than
"A 1", if then rated by Standard & Poor's Corporation;
(e) mortgage-backed securities guaranteed by the Government
National Mortgage Association, the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation and other mortgage-backed bonds which at
the time of purchase are rated by Moody's Investors Service, Inc. or by Standard
& Poor's Corporation at not less than "Aa" if then rated by Moody's Investors
Service, Inc. and not less than "AA" if then rated by Standard & Poor's
Corporation;
(f) repurchase agreements having a term not greater than 180
days and fully secured by securities described in the foregoing subsections (a),
(b) or (e) with the Lenders, banks described in the foregoing subsection (c) or
financial institutions or other corporations having total assets in excess of
$500,000,000;
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(g) shares of so-called "money market funds" registered with
the Securities and Exchange Commission under the Investment Company Act of 1940
which maintain a level per-share value, invest principally in investments
described in the foregoing subsections (a) through (f) and have total assets in
excess of $50,000,000;
(h) subject to Section 7.17 and Section 9, fee interests and
leasehold interests in Real Estate utilized or to be utilized principally for
office and/or industrial purposes, including earnest money deposits relating
thereto and transaction costs; PROVIDED that the Borrower, REA, or its
Subsidiaries shall be permitted to acquire or lease interests in Real Estate
which is not utilized or to be utilized for office or industrial purposes if (i)
such Real Estate is acquired or leased by the Borrower, REA, or its Subsidiaries
in connection with the acquisition of a portfolio of predominantly office and/or
industrial properties and (ii) the aggregate cost of such non-office/industrial
Real Estate and all other non-office/industrial Real Estate previously acquired
or leased by the Borrower pursuant to this proviso does not exceed at any time
ten percent (10%) of the Consolidated Total Assets of REA;
(i) Subsidiaries of the Borrower listed on SCHEDULE 6.21 and
any wholly-owned Subsidiaries of the Borrower who become Guarantors pursuant to
Section 5.3 hereof;
(j) subject to Section 7.17, joint ventures formed for the
purpose of owning, leasing and/or developing Real Estate and which are not
Subsidiaries of REA or the Borrower; PROVIDED that the aggregate amount of such
Investments shall not at any time exceed ten percent (10%) of the Consolidated
Total Assets of REA; and
(k) mortgages secured principally by real property which is
improved by an office and/or industrial building or other income-producing real
property; PROVIDED, HOWEVER, that the aggregate cost of such mortgages and
related debt (or if originated by Borrower or REA, the principal amount
outstanding thereunder) shall not exceed ten percent (10%) of REA's Consolidated
Total Assets.
Section 8.4 MERGER, CONSOLIDATION. The Borrower, REA and the Guarantors
will not, and will not permit their respective Subsidiaries to, become a party
to any merger, consolidation or other business combination or agree to effect
any asset acquisition, stock acquisition or other acquisition, in each case
without the prior written consent of the Majority Lenders, except for (i) the
merger or consolidation of two or more Subsidiaries of the Borrower, REA or any
Guarantor, and (ii) the merger or consolidation of one or more of the
Subsidiaries of the Borrower, REA or any Guarantor with and into the Borrower,
REA or any Guarantor where the Borrower, REA or a Guarantor is the sole
surviving entity; provided that both the Borrower and REA shall at all times
continue their existence as separate entities.
Section 8.5 SALE AND LEASEBACK. The Borrower, REA and the Guarantors
will not, and will not permit their respective Subsidiaries to enter into any
arrangement, directly or indirectly,
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whereby the Borrower, REA, any Guarantor or any such Subsidiary shall sell or
transfer any Real Estate owned by it in order that then or thereafter the
Borrower, REA, a Guarantor or any such Subsidiary shall lease back such Real
Estate.
Section 8.6 COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower, REA and
the Guarantors will not, and will not permit their respective Subsidiaries to,
do any of the following: (a) use any of the Real Estate or any portion thereof
as a facility for the handling, processing, storage or disposal of Hazardous
Substances, except for small quantities of Hazardous Substances used in the
ordinary course of business and in compliance with all applicable Environmental
Laws, (b) cause or permit to be located on any of the Real Estate any
underground tank or other underground storage receptacle for Hazardous
Substances except in full compliance with Environmental Laws, (c) generate any
Hazardous Substances on any of the Real Estate except in full compliance with
Environmental Laws, (d) conduct any activity at any Real Estate or use any Real
Estate in any manner so as to cause a Release of Hazardous Substances on, upon
or into the Real Estate or any surrounding properties or any threatened Release
of Hazardous Substances which might give rise to liability under CERCLA or any
other Environmental Law, or (e) directly or indirectly transport or arrange for
the transport of any Hazardous Substances (except in compliance with all
Environmental Laws).
The Borrower, REA and the Guarantors shall, and shall cause their
respective Subsidiaries to:
(i) in the event of any change in Environmental Laws governing
the assessment, release or removal of Hazardous Substances, take all
reasonable action (including, without limitation, the conducting of
engineering tests at the sole expense of the Borrower) to confirm that
no Hazardous Substances are or ever were Released or disposed of on the
Real Estate in violation of applicable Environmental Laws, changed as
aforesaid; and
(ii) if any Release or disposal of Hazardous Substances shall
occur or shall have occurred on the Real Estate (including without
limitation any such Release or disposal occurring prior to the
acquisition or leasing of such Real Estate by the Borrower, REA,
Guarantor or any such Subsidiary), cause the prompt containment and
removal of such Hazardous Substances and remediation of the Real Estate
in full compliance with all applicable laws and regulations; PROVIDED,
that each of the Borrower, REA, the Guarantors and their respective
Subsidiaries shall be deemed to be in compliance with Environmental
Laws for the purpose of this clause (ii) so long as it or a responsible
third party with sufficient financial resources is taking reasonable
action to remediate or manage any event of noncompliance to the
satisfaction of the Majority Lenders and no action shall have been
commenced by any enforcement agency. The Majority
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Lenders may engage their own Environmental Engineer to review the
environmental assessments and the compliance with the covenants
contained herein. Notwithstanding the foregoing, if any Release or
disposal of Hazardous Substances shall occur or shall have occurred on
the Real Estate (except any such Release or disposal occurring prior to
the acquisition or leasing of such Real Estate by the Borrower, REA, a
Guarantor or any such Subsidiary and disclosed in an environmental
assessment delivered to the Agent prior to the inclusion of such Real
Estate in the Collateral) and such Real Estate is a Mortgaged Property,
the Agent shall have the right to require that the Borrower, in
compliance with Section 9, provide to the Agent a substitute Mortgaged
Property which is Eligible Real Estate within ninety (90) days of
demand by the Agent in accordance with Section 5.3 or obtain the
release of such Mortgaged Property pursuant to Section 5.4.
At any time after an Event of Default shall have occurred hereunder,
or, whether or not an Event of Default shall have occurred, at any time that the
Agent or the Majority Lenders shall have reasonable grounds to believe that a
Release or threatened Release of Hazardous Substances may have occurred,
relating to any Real Estate, or that any of the Real Estate is not in compliance
with Environmental Laws, the Agent may at its election (and will at the request
of the Majority Lenders) obtain such environmental assessments of such Real
Estate prepared by an Environmental Engineer as may be necessary or advisable
for the purpose of evaluating or confirming (i) whether any Hazardous Substances
are present in the soil or water at or adjacent to such Real Estate and (ii)
whether the use and operation of such Mortgaged Property comply with all
Environmental Laws. Environmental assessments may include detailed visual
inspections of such Real Estate including, without limitation, any and all
storage areas, storage tanks, drains, dry wells and leaching areas, and the
taking of soil samples, as well as such other investigations or analyses as are
necessary or appropriate for a complete determination of the compliance of such
Real Estate and the use and operation thereof with all applicable Environmental
Laws. All such environmental assessments shall be at the sole cost and expense
of the Borrower; except for those assessments required by the Agent at a time
when an Event of Default does not exist and which fail to reveal the existence
of a Release of Hazardous Substance and/or that the Real Estate is not in
compliance with Environmental Laws, which assessments shall be at the sole cost
and expense of the Lenders.
Section 8.7 DISTRIBUTIONS. Neither the Borrower, REA or the Guarantors
will, or will permit their respective Subsidiaries to, make any Distributions
which would violate any of the following covenants:
(a) Neither the Borrower nor REA will pay any Distribution to
its partners or shareholders the amount of which, when added to the amount of
all other Distributions paid by it in the same fiscal quarter and the three
immediately preceding fiscal quarters, would exceed one hundred percent (100%)
of its Funds from Operations for such period;
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(b) In the event that an Event of Default shall have occurred
and be continuing, neither the Borrower nor REA shall make any Distributions
other than the minimum Distributions required under the Code to maintain the
REIT Status of REA, as evidenced by a certification of an authorized
representative of each of the Borrower and REA containing calculations in
reasonable detail satisfactory in form and substance to the Agent; and
(c) In the event that an Event of Default shall have occurred
and be continuing and the maturity of the Obligations has been accelerated,
neither the Borrower, REA, the Guarantors nor any of their respective
Subsidiaries shall make any Distributions whatsoever, either directly or
indirectly.
Section 8.8 ASSET SALES. Neither the Borrower, REA or the Guarantors
will, or will permit their respective Subsidiaries to, sell, transfer or
otherwise dispose of any Real Estate or equity interests therein (except as the
result of a condemnation or casualty and except for the granting of Permitted
Liens) unless there shall have been delivered to the Lenders a statement of the
Borrower that no Default or Event of Default exists and, in the event that such
disposition is of Real Estate having a value greater than $10,000,000, a
Compliance Certificate demonstrating compliance with the covenants referred to
therein after giving effect to such sale, transfer or other disposition.
Section 8.9 DEVELOPMENT ACTIVITY. Neither the Borrower, REA or the
Guarantors will, or will permit respective Subsidiaries to, engage, directly or
indirectly (including through any joint venture in which the Borrower, REA, any
Guarantor or their respective Subsidiaries owns a Minority Interest), in the
development of properties without the prior written consent of the Majority
Lenders in their sole discretion; PROVIDED that without the consent of the
Majority Lenders the Borrower, REA, the Guarantors or their respective
Subsidiaries may engage in the development of any number of properties to be
used principally for office and/or industrial purposes provided that the
aggregate cost (on a fully developed basis) of acquisition and development of
properties Under Development at any time shall not exceed twenty percent (20%)
of the Consolidated Total Assets of REA. Each of the Borrower, REA and the
Guarantors will, and will cause each of its respective Subsidiaries to, at all
times that it is engaging in any development as provided herein, maintain
available sources of capital equal to the total cost to acquire and complete
such developments and to purchase such properties, which sources of capital
shall be acceptable to the Agent in its reasonable discretion. Amounts available
to be disbursed for such purposes pursuant to this Agreement may be considered
as a source of capital for the purposes of this Section 8.9.
Section 8.10 RESTRICTION ON PREPAYMENT OF INDEBTEDNESS. Neither the
Borrower, REA or the Guarantors will, or will permit their respective
Subsidiaries to, prepay after the occurrence of any Event of Default the
principal amount, in whole or in part, of any Indebtedness other than the
Obligations; PROVIDED, that this Section 8.10 shall not prohibit the prepayment
of Indebtedness which is
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financed solely from the proceeds of a new loan which would otherwise be
permitted by the terms of Section 8.1.
Section 8.11 ZONING AND CONTRACT CHANGES AND COMPLIANCE. Neither the
Borrower, REA nor any Guarantor shall initiate or consent to any zoning
reclassification of any of its Mortgaged Property or seek any variance under any
existing zoning ordinance or use or permit the use of any Mortgaged Property in
any manner that could result in such use becoming a non-conforming use under any
zoning ordinance or any other applicable land use law, rule or regulation.
Neither the Borrower, REA, nor the Guarantors shall initiate or consent to any
change in any laws, requirements of governmental authorities or obligations
created by private contracts and Leases which now or hereafter may materially
adversely affect the ownership, occupancy, use or operation of any Mortgaged
Property.
Section 8.12 INTENTIONALLY OMITTED.
Section 8.13 PAYMENTS TO SUBSIDIARIES. Neither REA nor the Borrower
will make any payments to any of its Subsidiaries for any purpose other than to
provide any such Subsidiary with funds to be used by such Subsidiary to (a)
subject to Section 7.17, acquire Eligible Real Estate which will be added to the
Borrowing Base or (b) acquire Real Estate that is subject to Non-recourse
Indebtedness described in Section 8.1(f) or Section 8.1(h).
Section 8.14 UNDEVELOPED LAND. The aggregate cost of acquiring the
direct and indirect interests of the Borrower, REA, the Guarantors and their
respective Subsidiaries in undeveloped land will not at any time exceed ten
percent (10%) of the Consolidated Total Assets of REA. For the purposes of this
Section 8.14, land will not be considered "undeveloped" if grading and site
improvement permits have been obtained and such site improvement work has
commenced.
Section 8.15 EQUITY FORWARDS. Neither the Borrower, REA nor any other
Guarantor shall enter into, contract, create, incur, acquire, issue, assume or
suffer to exist any equity index swap, equity forward transaction or other
equity swap or equity futures agreement or arrangement; provided, however, that
the foregoing prohibition shall not be deemed to prohibit customary issuances in
the ordinary course of business of preferred equity, convertible preferred
equity or convertible debt for an amount and kind of consideration that is fixed
both in kind and amount at the time of original issuance.
Section 9 FINANCIAL COVENANTS.
Each of the Borrower and REA covenants and agrees that, so long as any
Loan or Note is outstanding or any Lender has any obligation to make any Loans:
Section 9.1 BORROWING BASE.
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(a) The outstanding principal balance of the Loans will not be
greater than the Borrowing Base.
(b) Subject to Borrower's right to prepay the entire
outstanding amount of the Loans in whole, but not in part, the Borrowing Base
shall at all times equal or exceed $80,000,000.
Section 9.2 DEBT COVERAGE. The aggregate Net Operating Income of the
Mortgaged Properties for any rolling two (2) fiscal quarters multiplied by two
(2), minus the Capital Improvement Reserves for the Mortgaged Properties, will
not be less than 1.5 times the Implied Pool Debt Service of the Borrower. In the
event that a Mortgaged Property shall have been owned by Borrower or a Guarantor
for less than two (2) fiscal quarters, the Net Operating Income of such
Mortgaged Property shall be grossed up in such manner as the Agent shall
reasonably determine.
Section 9.3 NET WORTH. The Consolidated Tangible Net Worth of the
Borrower will not at any time be less than Minimum Tangible Net Worth.
Section 9.4 LIABILITIES TO ASSETS RATIO. The ratio of Consolidated
Total Liabilities of REA to Consolidated Total Assets of REA at the end of any
fiscal quarter shall not exceed 0.65 to 1:
Section 9.5 CONSOLIDATED OPERATING CASH FLOW COVERAGE. The Consolidated
Operating Cash Flow of REA for any rolling two (2) fiscal quarters shall not be
less than 1.70 times the Debt Service of REA on a consolidated basis for such
period.
Section 10 CLOSING CONDITIONS.
The obligation of the Lenders to make the Loans to be advanced on the
Closing Date shall be subject to the satisfaction of the following conditions
precedent:
Section 10.1 LOAN DOCUMENTS. Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto and shall be in
full force and effect. The Agent shall have received a fully executed
counterpart of each such document, except that each Lender shall have received
the fully executed original of its Note. The Agent is authorized by the Lenders
to execute on behalf of the Lenders and Agent, as applicable, any amendments or
ratifications to agreements securing or relating to the Original Loan Agreement
as Agent deems appropriate.
Section 10.2 CERTIFIED COPIES OF ORGANIZATIONAL DOCUMENTS. The Agent
shall have received from the Borrower, REA and each applicable Guarantor the
partnership agreement, corporate charter or other organizational documents of
the Borrower, REA or such Guarantor, certified as true and complete as of a
recent date by (i) the appropriate officer of each State in which the
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Borrower, REA and each such Guarantor, as applicable, is organized and in which
the Mortgaged Properties are located, and (ii) a duly authorized officer of the
Borrower, REA and each such
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Guarantor (or a certification satisfactory to Agent that there have been no
changes to the foregoing from those previously provided to the Agent). In
addition, the Agent shall have received evidence of the Borrower's, REA's and
each applicable Guarantor's qualification to do business, as applicable, as in
effect on such date of certification.
Section 10.3 BYLAWS; RESOLUTIONS. All action on the part of the
Borrower, REA and each applicable Guarantor, as applicable, necessary for the
valid execution, delivery and performance by such Person of this Agreement and
the other Loan Documents to which such Person is or is to become a party shall
have been duly and effectively taken, and evidence thereof satisfactory to the
Agent shall have been provided to the Agent.
Section 10.4 INCUMBENCY CERTIFICATE; AUTHORIZED SIGNERS. The Agent
shall have received from REA and each applicable corporate Guarantor an
incumbency certificate, dated as of the Closing Date, signed by a duly
authorized officer of such Person and giving the name and bearing a specimen
signature of each individual who shall be authorized to sign, in the name and on
behalf of such Person, each of the Loan Documents to which such Person is or is
to become a party. The Agent shall have also received from the Borrower and each
applicable partnership Guarantor a certificate, dated as of the Closing Date,
signed by a duly authorized representative of such Person and giving the name
and specimen signature of each individual who shall be authorized to make Loan
Requests and to give notices and to take other action on behalf of the Borrower
under the Loan Documents.
Section 10.5 OPINION OF COUNSEL. The Agent shall have received an
opinion addressed to the Lenders and the Agent and dated as of the Closing Date
from counsel to the Borrower, REA and each Guarantor in form and substance
satisfactory to the Agent.
Section 10.6 PAYMENT OF FEES. The Borrower shall have paid to the Agent
the fees payable pursuant to Section 4.2.
Section 10.7 INTENTIONALLY OMITTED.
Section 10.8 INTENTIONALLY OMITTED.
Section 10.9 INSURANCE. The Agent shall have received duplicate
originals or certified copies of all policies of insurance required by this
Agreement.
Section 10.10 PERFORMANCE; NO DEFAULT. Each Borrower, REA and the
applicable Guarantors shall have performed and complied with all terms and
conditions herein required to be performed or complied with by it on or prior to
the Closing Date, and on the Closing Date there shall exist no Default or Event
of Default.
Section 10.11 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Borrower, REA and the applicable Guarantors in the Loan
Documents or otherwise made by or
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on behalf of the Borrower, REA and the applicable Guarantors in connection
therewith or after the date thereof shall have been true and correct in all
material respects when made and shall also be true and correct in all material
respects on the Closing Date.
Section 10.12 PROCEEDINGS AND DOCUMENTS. All proceedings in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be reasonably satisfactory to the Agent and the Agent's counsel
in form and substance, and the Agent shall have received all information and
such counterpart originals or certified copies of such documents and such other
certificates, opinions, assurances, consents, approvals or documents as the
Agent and the Agent's counsel may reasonably require.
Section 10.13 ELIGIBLE REAL ESTATE QUALIFICATION DOCUMENTS. The
Eligible Real Estate Qualification Documents for each Mortgaged Property
included in the Collateral as of the Closing Date shall have been delivered to
the Agent at the Borrower's expense and shall be in form and substance
satisfactory to the Agent.
Section 10.14 COMPLIANCE CERTIFICATE. The Agent shall have received a
Compliance Certificate dated as of the date of the Closing Date demonstrating
compliance with each of the covenants calculated therein as of the most recent
fiscal quarter for which REA has provided financial statements under Section 6.4
adjusted in the best good faith estimate of REA as of the Closing Date.
Section 10.15 INTENTIONALLY OMITTED.
Section 10.16 INTENTIONALLY OMITTED.
Section 10.17 ENDORSEMENTS TO TITLE POLICY. To the extent available
under applicable law, the Agent shall have received a "date down" endorsement to
each Title Policy indicating no change in the state of title and containing no
survey exceptions not approved by the Agent, which endorsement shall bring
forward the date of the Title Policy to the Closing Date and reflect the
execution of this Agreement and the recording of amendments to the Security
Documents described in the Title Policy.
Section 11 CONDITIONS TO ALL BORROWINGS.
The obligations of the Lenders to make any Loan, whether on or after
the Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
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Section 11.1 PRIOR CONDITIONS SATISFIED. All conditions set forth in
Section 10 shall continue to be satisfied with respect to all of the Mortgaged
Properties and otherwise as of the date upon which any Loan is to be made.
Section 11.2 REPRESENTATIONS TRUE; NO DEFAULT. Each of the
representations and warranties made by or on behalf of the Borrower, REA or the
Guarantors or any of their respective Subsidiaries contained in this Agreement,
the other Loan Documents or in any document or instrument delivered pursuant to
or in connection with this Agreement shall be true in all material respects both
as of the date as of which they were made and shall also be true as of the time
of the making of such Loan, with the same effect as if made at and as of that
time (it being understood and agreed that any representation or warranty which
by its terms is made as of a specified date shall be required to be true and
correct only as of such specified date), and no Default or Event of Default
shall have occurred and be continuing. Each of the Lenders shall have received a
certificate of the Borrower and REA signed by an authorized representative of
the Borrower and REA to such effect.
Section 11.3 INTENTIONALLY OMITTED.
Section 11.4 INTENTIONALLY OMITTED.
Section 11.5 PROCEEDINGS AND DOCUMENTS. All proceedings in connection
with such Loan shall be reasonably satisfactory in substance and in form to the
Agent, and the Agent's counsel in form and substance and the Agent shall have
received all information and such counterpart originals or certified or other
copies of such documents and such other certificates, opinions, assurances,
consents, approvals or documents as the Agent and the Agent's counsel may
reasonably require.
Section 11.6 BORROWING DOCUMENTS. The Agent shall have received a fully
completed Loan Request for such Loan and the other documents and information
(including, without limitation, a Compliance Certificate) as required by
Section 2.6.
Section 11.7 ENDORSEMENT TO TITLE POLICY. At such times as Agent shall
determine in its discretion, to the extent available under applicable law, a
"date down" endorsement to each Title Policy indicating no change in the state
of title and containing no survey exceptions not approved by the Agent, which
endorsement shall, expressly or by virtue of a proper "revolving credit" clause
or endorsement in each Title Policy, increase the coverage of each Title Policy
to the aggregate amount of all Loans advanced and outstanding on or before the
effective date of such endorsement (provided that the amount of coverage under
an individual Title Policy for an individual Mortgaged Property need not equal
the aggregate amount of all Loans), or if such endorsement is not available,
such other evidence and assurances as the Agent may reasonably require (which
evidence may include, without limitation, an affidavit from the Borrower stating
that there have been no changes in title from the date of the last effective
date of the Title Policy).
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Section 11.8 FUTURE ADVANCES TAX PAYMENT. As a condition precedent to
any Lender's obligations to make any Loans available to the Borrower hereunder,
the Borrower will pay to the Agent any mortgage, recording, intangible,
documentary stamp or other similar taxes and charges which the Agent reasonably
determines to be payable as a result of such Loan to any state or any county or
municipality thereof in which any of the Mortgaged Properties are located, and
deliver to the Agent such affidavits or other information which the Agent
reasonably determines to be necessary in connection with such payment in order
to insure that the Mortgages on Mortgaged Property located in such state secure
the Borrower' obligation with respect to the Loans then being requested by the
Borrower. The provisions of this Section 11.8 shall not limit the Borrower's
obligations under other provisions of the Loan Documents, including without
limitation Section 15 hereof.
Section 12 EVENTS OF DEFAULT; ACCELERATION; ETC.
Section 12.1 A. EVENTS OF DEFAULT AND ACCELERATION. If any of the
following events ("Events of Default" or, if the giving of notice or the lapse
of time or both is required, then, prior to such notice or lapse of time,
"Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the Loans
when the same shall become due and payable, whether at the stated date of
maturity or any accelerated date of maturity or at any other date fixed for
payment;
(b) the Borrower shall fail to pay any interest on the Loans
or any other sums due hereunder or under any of the other Loan Documents, within
three (3) days from the date the same shall become due and payable, whether at
the stated date of maturity or any accelerated date of maturity or at any other
date fixed for payment;
(c) the Borrower or REA shall fail to comply with the covenant
contained in Section 9.1 and such failure shall continue to exist after written
notice thereof shall have been given to the Borrower by the Agent and the cure
period provided in Section 12.1B(a) shall have ended;
(d) the Borrower or REA shall fail to comply with any covenant
contained in Section 9.2, Section 9.3, Section 9.4 or Section 9.5 and such
failure shall continue for thirty (30) days after written notice thereof shall
have been given to the Borrower by the Agent;
(e) any of the Borrower, REA, the Guarantors, or any of their
respective Subsidiaries shall fail to perform any other term, covenant or
agreement contained herein or in any of the other Loan Documents which they are
required to perform (other than those specified in the other subclauses of this
Section 12) and such failure shall continue for thirty (30) days after written
notice thereof shall have been given to the Borrower by the Agent or such longer
period,
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not to exceed an additional sixty (60) days, as may be required to cure such
default, PROVIDED that cure is being diligently pursued;
(f) any representation or warranty made by or on behalf of the
Borrower, REA, the Guarantors, or any of their respective Subsidiaries in this
Agreement or any other Loan Document, or any report, certificate, financial
statement, request for a Loan, or in any other document or instrument delivered
pursuant to or in connection with this Agreement, any advance of a Loan or any
of the other Loan Documents shall prove to have been false in any material
respect upon the date when made or deemed to have been made or repeated and such
representation or warranty shall continue to be false after written notice
thereof shall have been given to the Borrower by the Agent and the cure period
provided in Section 12.1(B)(c) shall have ended;
(g) any of the Borrower, REA, the Guarantors, or any of their
respective Subsidiaries (i) shall fail to pay at maturity, or within any
applicable period of grace, any obligation for borrowed money or credit received
or other Indebtedness in a principal amount exceeding $2,000,000, or (ii) shall
fail to observe or perform any term, covenant or agreement contained in any
agreement by which it is bound, evidencing or securing any obligation for
borrowed money or credit received or other Indebtedness in a principal amount
exceeding $2,000,000 for such period of time as would permit (assuming the
giving of appropriate notice if required) the holder or holders thereof or of
any obligations issued thereunder to accelerate the maturity thereof;
(h) any of the Borrower, REA, the Guarantors, or any of their
respective Subsidiaries, (i) shall make an assignment for the benefit of
creditors, or admit in writing its general inability to pay or generally fail to
pay its debts as they mature or become due, or shall petition or apply for the
appointment of a trustee or other custodian, liquidator or receiver for it or
any substantial part of its assets, (ii) shall commence any case or other
proceeding relating to it under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or (iii) shall take any action to
authorize or in furtherance of any of the foregoing;
(i) a petition or application shall be filed for the
appointment of a trustee or other custodian, liquidator or receiver of any of
the Borrower, REA, the Guarantors, or any of their respective Subsidiaries or
any substantial part of the assets of any thereof, or a case or other proceeding
shall be commenced against any such Person under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect, and any such Person
shall indicate its approval thereof, consent thereto or acquiescence therein or
such petition, application, case or proceeding shall not have been dismissed
within ninety (90) days following the filing or commencement thereof;
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(j) a decree or order is entered appointing a trustee,
custodian, liquidator or receiver for any of the Borrower, REA, the Guarantors,
or any of their respective Subsidiaries or adjudicating any such Person,
bankrupt or insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect of any such
Person in an involuntary case under federal bankruptcy laws as now or hereafter
constituted;
(k) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than sixty (60) days, whether or not consecutive, one or more
uninsured final judgments against any of the Borrower, REA, the Guarantors, or
any of their respective Subsidiaries that, either individually or in the
aggregate, exceed $2,000,000;
(l) any of the Loan Documents shall be canceled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof or the
express prior written agreement, consent or approval of the Lenders, or any
action at law, suit in equity or other legal proceeding to cancel, revoke or
rescind any of the Loan Documents shall be commenced by or on behalf of any of
the Borrower, REA or the Guarantors, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination, or issue a judgment, order, decree or ruling, to the effect that
any one or more of the Loan Documents is illegal, invalid or unenforceable in
accordance with the terms thereof;
(m) any dissolution, termination, partial or complete
liquidation, merger or consolidation of any of the Borrower, REA or any
Guarantor shall occur or any sale, transfer or other disposition of the assets
of any of the Borrower, REA or any Guarantor shall occur other than as permitted
under the terms of this Agreement or the other Loan Documents;
(n) the Borrower or REA shall fail to comply with the covenant
contained in Section 7.19;
(o) all of any portion of a Mortgaged Property (or any
interest therein) is forfeited as a result of any criminal or quasi-criminal
activity by the owner thereof (or any Person related to the owner thereof);
(p) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Lenders shall have
determined in their reasonable discretion that such event reasonably could be
expected to result in liability of any of the Borrower, REA, the Guarantors or
any of their respective Subsidiaries to the PBGC or such Guaranteed Pension Plan
in an aggregate amount exceeding $2,000,000 and such event in the circumstances
occurring reasonably could constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer such Guaranteed Pension
Plan; or a trustee shall have been appointed by the United States District Court
to administer such Plan; or the PBGC shall have instituted proceedings to
terminate such Guaranteed Pension Plan;
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(q) Jeffrey Kelter shall cease to have chief executive
responsibilities of REA, and a competent and experienced successor for such
Person shall not be approved by the Majority Lenders within six (6) months of
such event, such approval not to be unreasonably withheld;
(r) REA shall fail to pay or perform any of its obligations
under Section 32 or any Guarantor shall fail to pay or perform any of its
obligations under its Guaranty; or
(s) an event of default under any of the other Loan Documents
shall occur;
then, and in any such event, the Agent may, and upon the request of the Majority
Lenders shall, by notice in writing to the Borrower declare all amounts owing
with respect to this Agreement, the Notes and the other Loan Documents to be,
and they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; PROVIDED that in the event of any Event
of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j), all
such amounts shall become immediately due and payable automatically and without
any requirement of presentment , demand, protest or other notice of any kind
from any of the Lenders or the Agent.
Section 12.1 B. CERTAIN CURE PERIODS.
(a) Within five (5) Business Days following its receipt of
notice from the Agent that a Default has occurred under Section 12.1 A. (c), the
Borrower shall notify the Agent in writing as to whether or not it will attempt
to cure such Default by providing additional Collateral consisting of Potential
Collateral and/or reducing the outstanding principal amount of Loans made to it.
Any such notice (the "Cure Proposal Notice") from the Borrower to the Agent
shall describe in detail the cure which the Borrower proposes to make. In the
event that the Agent does not receive the Cure Proposal Notice from the Borrower
within such five (5) Business Day period, the Borrower's cure period shall end
and the Default under Section 12.1 A. (c) shall immediately become an Event of
Default without any further notice from or other action by the Agent or the
Lenders. In the event that the Agent receives the Cure Proposal Notice from the
Borrower within such five (5) Business Day period, the Agent shall promptly
deliver the same to the Lenders and the actions proposed to be taken by the
Borrower as specified therein shall be completed not later than fifteen (15)
days following the date on which the Borrower is notified by the Agent that the
Majority Lenders have approved the Borrower's proposed actions (or within thirty
(30) days in the event that the Borrower's proposed actions include the Borrower
providing additional Collateral consisting of Potential Collateral). Within five
(5) Business Days after their receipt of the Cure Proposal Notice, the Agent
shall advise the Borrower as to whether or not the Majority Lenders approve the
Borrower's proposed actions based on their good faith business judgment as to
whether the actions proposed by the Borrower are sufficient to cure the Default
under Section 12.1 A. (c) without the creation of any other Default. In the
event that the Agent
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notifies the Borrower of the disapproval by the Majority Lenders of the
Borrower's proposed actions based on the determination by the Majority Lenders
that in their good faith business judgment that the actions proposed by the
Borrower are insufficient to so cure such Default, the Borrower may, within
three (3) Business Days following its receipt of such notice, submit to the
Agent an alternative cure proposal or evidence establishing that the Borrower's
original cure proposal was so sufficient. Any such submission by the Borrower
shall be in writing and shall describe in detail the alternative actions which
the Borrower proposes to take or the evidence establishing that the Borrower's
original cure proposal was so sufficient. In the event that the Agent does not
receive such submission within such three (3) Business Day period, the
Borrower's cure period shall end and the Default under Section 12.1 A. (c) shall
immediately become an Event of Default without any further notice from or other
action by the Agent or the Lenders. In the event that the Agent receives such
submission from the Borrower within such three (3) Business Day period, the
Agent shall promptly deliver the same to the Lenders and the Agent shall, within
five (5) Business Days following their receipt of such submission, advise the
Borrower as to whether in the Majority Lenders' good faith business judgment
such alternative cure proposal is sufficient to cure such Default without the
creation of any other Default hereunder or the Borrower's original cure proposal
is so sufficient. In the event that the Majority Lenders determine that the
original or alternative cure proposal is so sufficient, the actions so approved
by the Majority Lenders to be taken by the Borrower shall be completed not later
than fifteen (15) days following the date on which the Borrower is notified by
the Agent that the Majority Lenders have approved such original or alternative
proposal (or within thirty (30) days in the event that the approved actions
include the Borrower providing additional Collateral consisting of Potential
Collateral). In the event that the Agent notifies the Borrower that the Majority
Lenders have determined that the original or alternative cure proposal is not so
sufficient, the Borrower's cure period shall end and the Default under Section
12.1 A. (c) shall immediately become an Event of Default without any further
notice from or other actions by the Agent or the Lenders. During any period that
a Default exists under Section 12.1 A. (c), the Lenders shall have no obligation
to make any further Loans hereunder.
(b) In the event that the Borrower shall elect under
subsection 12.1B(a) to provide additional Collateral consisting of Potential
Collateral, the Real Estate to be added to the Collateral shall be Eligible Real
Estate and on or prior to the expiration of the 30-day period referred to in
subclause (a) above each of the Eligible Real Estate Qualification Documents
shall have been completed at the Borrower's expense and provided to the Agent
for the benefit of the Lenders.
(c) Within five (5) Business Days following its receipt of
notice from the Agent that a Default has occurred under Section 12.1A(f) with
respect to any representation and warranty to Mortgaged Property (including,
without limitation, the representations and warranties contained in Section 6.20
and Section 6.24), the Borrower shall notify the Agent in writing as to
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whether or not it will attempt to cure such Default by substituting for such
Mortgaged Property additional Collateral consisting of Potential Collateral. The
Cure Proposal Notice from the Borrower to the Agent shall describe in detail the
cure which the Borrower proposes to make. In the event that the Agent does not
receive the Cure Proposal Notice from the Borrower within such five (5) Business
Day period, the Borrower's Cure period shall end and the Default under Section
12.1 A. (f) shall immediately become an Event of Default without any further
notice from or other action by the Agent or the Lenders. In the event that the
Agent receives the Cure Proposal Notice from the Borrower within such five (5)
Business Day period, the Agent shall promptly deliver the same to the Lenders
and the actions proposed to be taken by the Borrower as specified therein shall
be completed not later than thirty (30) days following the date on which the
Borrower is notified by the Agent that the Majority Lenders have approved the
Borrower's proposed actions. Within five (5) Business Days after their receipt
of the Cure Proposal Notice, the Agent shall advise the Borrower as to whether
or not the Majority Lenders approve the Borrower's proposed actions based on
their good faith business judgment as to whether the actions proposed by the
Borrower are sufficient to cure the Default under Section 12.1 A. (f) without
the creation of any other Default. In the event that the Agent notifies the
Borrower of the disapproval by the Majority Lenders of the Borrower's proposed
actions based on the determination by the Majority Lenders that in their good
faith business judgment the actions proposed by the Borrower are insufficient to
so cure such Default, the Borrower may, within three (3) Business Days following
its receipt of such notice, submit to the Agent an alternative cure proposal or
evidence establishing that the Borrower's original cure proposal was so
sufficient. Any such submission by the Borrower shall be in writing and shall
describe in detail the alternative actions which the Borrower proposes to take
or the evidence establishing that the Borrower's original cure proposal was so
sufficient. In the event that the Agent does not receive such submission within
such three (3) Business Day period, the Borrower's cure period shall end and the
Default under Section 12.1 A. (f) shall immediately become an Event of Default
without any further notice from or other action by the Agent or the Lenders. In
the event that the Agent receives such submission from the Borrower within such
three (3) Business Day period, the Agent shall promptly deliver the same to the
Lenders and the Agent shall, within five (5) Business Days following their
receipt of such submission, advise the Borrower as to whether in the Majority
Lenders' good faith business judgment such alternative cure proposal is
sufficient to cure such Default without the creation of any other Default
hereunder or the Borrower's original cure proposal is so sufficient. In the
event that the Majority Lenders determine that the original or alternative cure
proposal is so sufficient, the actions so approved by the Majority Lenders to be
taken by the Borrower shall be completed not later than thirty (30) days
following the date on which the Borrower is notified by the Agent that the
Majority Lenders have approved such original or alternative cure proposal. In
the event that the Agent notifies the Borrower that the Majority Lenders have
determined that the original or alternative cure proposal is not so sufficient,
the Borrower's cure period shall end and the Default under Section 12.1 A. (f)
shall immediately become an Event of Default without any further notice from or
other actions by the
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Agent or the Lenders. During any period that a Default exists under Section
12.1A. (f), the Lenders shall have no obligation to make any further Loans
hereunder.
Section 12.2 TERMINATION OF COMMITMENTS. If any one or more Events of
Default specified in Section 12.1A.(h), Section 12.1A.(i) or Section 12.1A.(j)
shall occur, then immediately and without any action on the part of the Agent or
any Lender any unused portion of the credit hereunder shall terminate and the
Lenders shall be relieved of all obligations to make Loans to the Borrower. If
any other Event of Default shall have occurred, the Agent, upon the election of
the Majority Lenders, shall by notice to the Borrower terminate the obligation
to make Loans to the Borrower. No termination under this Section 12.2 shall
relieve the Borrower of its obligations to the Lenders arising under this
Agreement or the other Loan Documents.
Section 12.3 REMEDIES. In case any one or more Events of Default shall
have occurred and be continuing, and whether or not the Lenders shall have
accelerated the maturity of the Loans pursuant to Section 12.1A., the Agent on
behalf of the Lenders may, with the consent of the Majority Lenders but not
otherwise, proceed to protect and enforce their rights and remedies under this
Agreement, the Notes and/or any of the other Loan Documents by suit in equity,
action at law or other appropriate proceeding, including to the full extent
permitted by applicable law the specific performance of any covenant or
agreement contained in this Agreement and the other Loan Documents, the
obtaining of the EX PARTE appointment of a receiver, and, if any amount shall
have become due, by declaration or otherwise, the enforcement of the payment
thereof. No remedy herein conferred upon the Agent or the holder of any Note is
intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or any other provision
of law. In the event that all or any portion of the Obligations is collected by
or through an attorney-at-law, the Borrower shall pay all costs of collection
including, but not limited to, reasonable attorney's fees.
Section 12.4 DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that,
following the occurrence and during the continuance of any Event of Default, any
monies are received in connection with the enforcement of any of the Security
Documents, or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of, all reasonable costs, expenses,
disbursements and losses which shall have been paid, incurred or sustained by
the Agent to protect or preserve the Collateral or in connection with the
collection of such monies by the Agent, for the exercise, protection or
enforcement by the Agent of all or any of the rights, remedies, powers and
privileges of the Agent or the Lenders under this Agreement or any of the other
Loan Documents or in respect of the Collateral or in support of any provision of
adequate indemnity to the Agent against any
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taxes or liens which by law shall have, or may have, priority over the rights of
the Agent or the Lenders to such monies;
(b) Second, to all other Obligations in such order or
preference as the Majority Lenders shall determine; PROVIDED, that (i)
distributions in respect of such other Obligations shall include, on a PARI
PASSU basis, the Agent's fee payable pursuant to Section 4.3; (ii) in the event
that any Lender shall have wrongfully failed or refused to make an advance under
Section 2.7 and such failure or refusal shall be continuing, advances made by
other Lenders during the pendency of such failure or refusal shall be entitled
to be repaid as to principal and accrued interest in priority to the other
Obligations described in this subsection (b), and (iii) except as otherwise
provided in clause (ii), Obligations owing to the Lenders with respect to each
type of Obligation such as interest, principal, fees and expenses shall be made
among the Lenders PRO RATA; and PROVIDED, further that the Majority Lenders may
in their discretion make proper allowance to take into account any Obligations
not then due and payable; and
(c) Third, the excess, if any, shall be returned to the
Borrower or to such other Persons as are entitled thereto.
Section 13 SETOFF.
Regardless of the adequacy of any Collateral, during the continuance of
any Event of Default, any deposits (general or specific, time or demand,
provisional or final, regardless of currency, maturity, or the branch where such
deposits are held) or other sums credited by or due from any Lender to the
Borrower, REA or the Guarantors and any securities or other property of the
Borrower , REA or the Guarantors in the possession of such Lender may be applied
to or set off against the payment of Obligations and any and all other
liabilities, direct, or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, of the Borrower, REA or the Guarantors to
such Lender. Each of the Lenders agrees with each other Lender that if such
Lender shall receive from the Borrower, REA or the Guarantors, whether by
voluntary payment, exercise of the right of setoff, or otherwise, and shall
retain and apply to the payment of the Note or Notes held by such Lender any
amount in excess of its ratable portion of the payments received by all of the
Lenders with respect to the Notes held by all of the Lenders, such Lender will
make such disposition and arrangements with the other Lenders with respect to
such excess, either by way of distribution, PRO TANTO assignment of claims,
subrogation or otherwise as shall result in each Lender receiving in respect of
the Notes held by it its proportionate payment as contemplated by this
Agreement; PROVIDED that if all or any part of such excess payment is thereafter
recovered from such Lender, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
Section 14 THE AGENT.
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Section 14.1 AUTHORIZATION. The Agent is authorized to take such action
on behalf of each of the Lenders and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably incident
thereto, PROVIDED that no duties or responsibilities not expressly assumed
herein or therein shall be implied to have been assumed by the Agent. The
obligations of the Agent hereunder are primarily administrative in nature, and
nothing contained in this Agreement or any of the other Loan Documents shall be
construed to constitute the Agent as a trustee for any Lender or to create an
agency or fiduciary relationship. The Borrower and any other Person shall be
entitled to conclusively rely on a statement from the Agent that it has the
authority to act for and bind the Lenders pursuant to this Agreement and the
other Loan Documents.
Section 14.2 EMPLOYEES AND AGENTS. The Agent may exercise its powers
and execute its duties by or through employees or agents and shall be entitled
to take, and to rely on, advice of counsel concerning all matters pertaining to
its rights and duties under this Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent may reasonably
determine, and all reasonable fees and expenses of any such Persons shall be
paid by the Borrower.
Section 14.3 NO LIABILITY. Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent, or employee thereof, shall be liable to any
of the Lenders for any waiver, consent or approval given or any action taken, or
omitted to be taken, in good faith by it or them hereunder or under any of the
other Loan Documents, or in connection herewith or therewith, or be responsible
for the consequences of any oversight or error of judgment whatsoever, except
that the Agent or such other Person, as the case may be, shall be liable for
losses due to its willful misconduct or gross negligence.
Section 14.4 NO REPRESENTATIONS. The Agent shall not be responsible for
the execution or validity or enforceability of this Agreement, the Notes, any of
the other Loan Documents or any instrument at any time constituting, or intended
to constitute, collateral security for the Notes, or for the value of any such
collateral security or for the validity, enforceability or collectibility of any
amounts owing with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan Documents
or in any certificate or instrument hereafter furnished to it by or on behalf of
the Borrower, REA, the Guarantors or any of their respective Subsidiaries, or be
bound to ascertain or inquire as to the performance or observance of any of the
terms, conditions, covenants or agreements herein or in any of the other Loan
Documents. The Agent shall not be bound to ascertain whether any notice,
consent, waiver or request delivered to it by the Borrower, REA, the Guarantors
or any holder of any of the Notes shall have been duly authorized or is true,
accurate and complete. The Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Lenders, with respect to the creditworthiness or financial
condition of the Borrower, REA, the Guarantors, or any of their respective
Subsidiaries, or the value of the Collateral
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or any other assets of the Borrower, REA or the Guarantors. Each Lender
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender, and based upon such information and documents as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent or any other Lender, based upon such information and
documents as it deems appropriate at the time, continue to make its own credit
analysis and decisions in taking or not taking action under this Agreement and
the other Loan Documents.
Section 14.5 PAYMENTS.
(a) A payment by the Borrower, REA or any Guarantor to the
Agent hereunder or under any of the other Loan Documents for the account of any
Lender shall constitute a payment to such Lender. The Agent agrees to distribute
to each Lender not later than one Business Day after the Agent's receipt of good
funds, determined in accordance with the Agent's customary practices, such
Lender's PRO RATA share of payments received by the Agent for the account of the
Lenders except as otherwise expressly provided herein or in any of the other
Loan Documents. In the event that the Agent shall receive a payment of principal
of the Loans which the Agent is unable to distribute to the Lenders by the end
of the Business Day upon which such funds are received, and the Agent is able to
reinvest such funds pending distribution to the Lenders, then the Agent shall
pay to the Lenders such Lender's PRO RATA share of such investment earnings.
(b) If in the opinion of the Agent the distribution of any
amount received by it in such capacity hereunder, under the Notes or under any
of the other Loan Documents might involve it in liability, it may refrain from
making distribution until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the Agent
is to be repaid, each Person to whom any such distribution shall have been made
shall either repay to the Agent its proportionate share of the amount so
adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
(c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Lender that fails (i) to make
available to the Agent its PRO RATA share of any Loan or (ii) to comply with the
provisions of Section 13 with respect to making dispositions and arrangements
with the other Lenders, where such Lender's share of any payment received,
whether by setoff or otherwise, is in excess of its PRO RATA share of such
payments due and payable to all of the Lenders, in each case as, when and to the
full extent required by the provisions of this Agreement, shall be deemed
delinquent (a "Delinquent Lender") and shall be deemed a Delinquent Lender until
such time as such delinquency is satisfied. A Delinquent Lender shall be deemed
to have assigned any and all payments due to it from the Borrower, REA or the
Guarantors, whether on account of outstanding Loans, interest, fees or
otherwise, to the
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remaining nondelinquent Lenders for application to, and reduction of, their
respective PRO RATA shares of all outstanding Loans. The Delinquent Lender
hereby authorizes the Agent to distribute such payments to the nondelinquent
Lenders in proportion to their respective PRO RATA shares of all outstanding
Loans. A Delinquent Lender shall be deemed to have satisfied in full a
delinquency when and if, as a result of application of the assigned payments to
all outstanding Loans of the nondelinquent Lenders or as a result of other
payments by the Delinquent Lenders to the nondelinquent Lenders, the Lenders'
respective PRO RATA shares of all outstanding Loans have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
Section 14.6 HOLDERS OF NOTES. Subject to the terms of Section 18, the
Agent may deem and treat the payee of any Note as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished in
writing with a different name by such payee or by a subsequent holder, assignee
or transferee.
Section 14.7 INDEMNITY. The Lenders ratably agree hereby to indemnify
and hold harmless the Agent from and against any and all claims, actions and
suits (whether groundless or otherwise), losses, damages, costs, expenses
(including any expenses for which the Agent has not been reimbursed by the
Borrower as required by Section 15), and liabilities of every nature and
character arising out of or related to this Agreement, the Notes, or any of the
other Loan Documents or the transactions contemplated or evidenced hereby or
thereby, or the Agent's actions taken hereunder or thereunder, except to the
extent that any of the same shall be directly caused by the Agent's willful
misconduct or gross negligence.
Section 14.8 AGENT AS LENDER. In its individual capacity, BankBoston
shall have the same obligations and the same rights, powers and privileges in
respect to its Commitment and the Loans made by it, and as the holder of any of
the Notes as it would have were it not also the Agent.
Section 14.9 RESIGNATION. The Agent may resign at any time by giving 60
days' prior written notice thereof to the Lenders and the Borrower. Upon any
such resignation, the Majority Lenders (and so long as no Default or Event of
Default exists hereunder, after consultation with the Borrower) shall have the
right to appoint as a successor Agent any Lender or any financial institution
whose senior debt obligations are rated not less than "A2" or its equivalent by
Moody's Investors Service, Inc. or not less than "A2" or its equivalent by
Standard & Poor's corporation and which has a net worth of not less than
$500,000,000. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within 30 days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be any Lender or any financial
institution whose senior debt
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obligations are rated not less than "A2" or its equivalent by Moody's Investors
Service, Inc. or not less than "A" or its equivalent by Standard & Poor's
Corporation and which has a net worth of not less than $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder as Agent.
After any retiring Agent's resignation, the provisions of this Agreement and the
other Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
Section 14.10 DUTIES IN THE CASE OF ENFORCEMENT. In case one or more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a) so
requested by the Majority Lenders and (b) the Lenders have provided to the Agent
such additional indemnities and assurances against expenses and liabilities as
the Agent may reasonably request, proceed to enforce the provisions of the
Security Documents authorizing the sale or other disposition of all or any part
of the Collateral and exercise all or any such other legal and equitable and
other rights or remedies as it may have in respect of such Collateral. The
Majority Lenders may direct, subject to the terms of any intercreditor agreement
among the Agent and the Lenders, the Agent in writing as to the method and the
extent of any such sale or other disposition, the Lenders hereby agreeing to
indemnify and hold the Agent harmless from all liabilities incurred in respect
of all actions taken or omitted in accordance with such directions.
Section 15 EXPENSES.
The Borrower agrees to pay (a) the reasonable costs of reproducing this
Agreement, the other Loan Documents and the other agreements and instruments
mentioned herein, (b) any taxes (including any interest and penalties in respect
thereto) payable by the Agent or any of the Lenders (other than taxes based upon
the Agent's or any Lender's gross or net income, except that the Agent and the
Lenders shall be entitled to indemnification for any and all amounts paid by
them in respect of taxes based on income or other taxes assessed by any State in
which Mortgaged Property or other Collateral is located, such indemnification to
be limited to taxes due solely on account of the granting of Collateral under
the Security Documents and to be net of any credit allowed to the indemnified
party from any other State on account of the payment or incurrence of such tax
by such indemnified party), including any recording, mortgage, documentary or
intangibles taxes in connection with the Mortgages and other Loan Documents, or
other taxes payable on or with respect to the transactions contemplated by this
Agreement, including any such taxes payable by the Agent or any of the Lenders
after the Closing Date (the Borrower hereby agreeing to indemnify the Agent and
each Lender with respect thereto), (c) all title insurance premiums, appraisal
fees, engineer's fees, environmental reviews and the reasonable fees, expenses
and disbursements of the counsel to the Agent and any local counsel to
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the Agent incurred in connection with the preparation, administration,
syndication or interpretation of the Loan Documents and other instruments
mentioned herein (excluding, however, the preparation of agreements evidencing
participations granted under Section 18.4), and amendments, modifications,
approvals, consents or waivers hereto or hereunder, (d) all other reasonable out
of pocket fees, expenses and disbursements of the Agent actually incurred by the
Agent in connection with the preparation or interpretation (arising from a
request from Borrower or any failure by Borrower, REA or the Guarantors to
perform any of their obligations under the Loan Documents) of the Loan Documents
and other instruments mentioned herein, the addition or substitution of
additional Mortgaged Properties or other Collateral, the review of leases and
Subordination, Nondisturbance and Attornment Agreements, the making of each
advance hereunder and the syndication of the Commitments pursuant to Section 18
(without duplication of those items addressed in subparagraph (c), above), (e)
all reasonable out-of-pocket expenses (including reasonable attorneys' fees and
costs, and the fees and costs of appraisers, engineers, investment bankers or
other experts retained by any Lender or the Agent) actually incurred by any
Lender or the Agent in connection with (i) the enforcement of or preservation of
rights under any of the Loan Documents against the Borrower, REA or the
Guarantors or the administration thereof after the occurrence of a Default or
Event of Default and (ii) any litigation, proceeding or dispute whether arising
hereunder or otherwise, in any way related to the Agent's or any of the Lenders'
relationship with the Borrower, REA or the Guarantors, (f) all reasonable fees,
expenses and disbursements of any Lender or the Agent incurred in connection
with UCC searches, UCC filings, title rundowns, title searches or mortgage
recordings, and (g) all reasonable fees, expenses and disbursements (including
reasonable attorneys' fees and costs) which may be incurred by BankBoston in
connection with the execution and delivery of this Agreement and the other Loan
Documents (without duplication of any of the items listed above). The covenants
of this Section 15 shall survive the repayment of the Loans and the termination
of the obligations of the Lenders hereunder.
Section 16 INDEMNIFICATION.
The Borrower agrees to indemnify and hold harmless the Agent and the
Lenders and each director, officer, employee, agent and Person who controls the
Agent or any Lender from and against any and all claims, actions and suits,
whether groundless or otherwise, and from and against any and all liabilities,
losses, damages and expenses of every nature and character arising out of or
relating to this Agreement or any of the other Loan Documents or the
transactions contemplated hereby and thereby including, without limitation, (a)
any and all claims for brokerage, leasing, finders or similar fees which may be
made relating to the Mortgaged Properties or the Loans (other than claims
resulting from agreements made by a Lender providing for the payment of such
fees), (b) any condition of the Mortgaged Properties, (c) any actual or proposed
use by the Borrower of the proceeds of any of the Loans, (d) any actual or
alleged infringement of any patent, copyright, trademark, service mark or
similar right of the Borrower, REA, the Guarantors, or any of their respective
Subsidiaries comprised in the
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Collateral, (e) the Borrower, REA and the Guarantors entering into or performing
this Agreement or any of the other Loan Documents, or (f) any actual or alleged
violation of any law, ordinance, code, order, rule, regulation, approval,
consent, permit or license relating to the Mortgaged Property, in each case
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding; PROVIDED, HOWEVER, that the Borrower shall not be obligated under
this Section 16 to indemnify any Person for liabilities arising from such
Person's own gross negligence or willful misconduct. In litigation, or the
preparation therefor, the Lenders and the Agent shall be entitled to select a
single law firm as their own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such counsel. If, and to the extent that the obligations of the Borrower
under this Section 16 are unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The provisions of this
Section 16 shall survive the repayment of the Loans and the termination of the
obligations of the Lenders hereunder.
Section 17 SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower, REA or the Guarantors or any
of their respective Subsidiaries pursuant hereto or thereto shall be deemed to
have been relied upon by the Lenders and the Agent, notwithstanding any
investigation heretofore or hereafter made by any of them, and shall survive the
making by the Lenders of any of the Loans, as herein contemplated, and shall
continue in full force and effect so long as any amount due under this Agreement
or the Notes or any of the other Loan Documents remains outstanding or any
Lender has any obligation to make any Loans. The indemnification obligations of
the Borrower provided herein and in the other Loan Documents shall survive the
full repayment of amounts due and the termination of the obligations of the
Lenders hereunder and thereunder to the extent provided herein and therein. All
statements contained in any certificate delivered to any Lender or the Agent at
any time by or on behalf of the Borrower, REA or the Guarantors or any of their
respective Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by such
Person hereunder.
Section 18 ASSIGNMENT AND PARTICIPATION.
Section 18.1 CONDITIONS TO ASSIGNMENT BY LENDERS. Except as provided
herein, each Lender may assign to one or more banks or other entities all or a
portion of its interests, rights and obligations under this Agreement (including
all or a portion of its Commitment Percentage and Commitment and the same
portion of the Loans at the time owing to it and the Notes held by it); provided
that (a) the Agent and, so long as no Default or Event of Default exists
hereunder, the
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Borrower shall have each given its prior written consent to such assignment,
which consent shall not be unreasonably withheld or delayed (provided that such
consent shall not be required for any assignment to another Lender, to a lender
which is and remains under common control with the assigning Lender or to a
wholly-owned Subsidiary of such Lender, provided that such assignee shall remain
a wholly-owned Subsidiary of such Lender), (b) each such assignment shall be of
a constant, and not a varying, percentage of all the assigning Lender's rights
and obligations under this Agreement, (c) the parties to such assignment shall
execute and deliver to the Agent, for recording in the Register (as hereinafter
defined), a notice of such assignment, (d) in no event shall any voting, consent
or approval rights of a Lender be assigned to any Person controlling, controlled
by or under common control with, or which is not otherwise free from influence
or control by, the Borrower or REA, which rights shall instead be allocated PRO
RATA among the other remaining Lenders (e) such assignee shall have a net worth
as of the date of such assignment of not less than $200,000,000, unless waived
by the Agent and the Borrower and (f) such assignee shall acquire an interest in
the Loans of not less than $5,000,000 (or if less, the remaining Loans of the
assignor), unless waived by the Agent and the Borrower. In addition, each Lender
shall attempt (but shall not be obligated) to assign its interests, rights and
obligations under this Agreement to a Person who shall be able to deliver to the
Borrower the documentation described in Section 4.4(c) evidencing no need to
withhold or deduct amounts from payments to be made such Person hereunder. Upon
execution, delivery, acceptance and recording of such notice of assignment, (i)
the assignee thereunder shall be a party hereto and all other Loan Documents
executed by the Lenders and have the rights and obligations of a Lender
hereunder, (ii) the assigning Lender shall, upon payment to the Agent of the
registration fee referred to in Section 18.2, be released from its obligations
under this Agreement arising after the effective date of such assignment with
respect to the assigned portion of its interests, rights and obligations under
this Agreement, and (iii) the Agent may unilaterally amend SCHEDULE 1 to reflect
such assignment. In connection with each assignment, the assignee shall
represent and warrant to the Agent, the assignor and each other Lender as to
whether such assignee is controlling, controlled by, under common Control with
or is not otherwise free from influence or control by, the Borrower or REA.
Notwithstanding anything herein to the contrary, in the event that BankBoston
shall at any time hold a Commitment less than $20,000,000, then BankBoston shall
promptly provide written notice thereof to the Lenders and the Majority Lenders
shall have the right, to be exercised within fifteen (15) days of delivery of
such notice by BankBoston, to elect to remove BankBoston as Agent and replace
BankBoston as Agent, subject to the terms of Section 14.9.
Section 18.2 REGISTER. The Agent shall maintain on behalf of the
Borrower a copy of each assignment delivered to it and a register or similar
list (the "Register") for the recordation of the names and addresses of the
Lenders and the Commitment Percentages of and principal amount of the Loans
owing to the Lenders from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, REA, the
Guarantors, the Agent
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and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower and the Lenders at any reasonable time
and from time to time upon reasonable prior notice. Upon each such recordation,
the assigning Lender agrees to pay to the Agent a registration fee in the sum of
$2,000.
Section 18.3 NEW NOTES. Upon its receipt of an assignment executed by
the parties to such assignment, the Agent shall (a) record the information
contained therein in the Register, and (b) give prompt notice thereof to the
Borrower and the Lenders (other than the assigning Lender). The assigning Lender
shall deliver to the Agent each Note which is the subject of an assignment.
Within five (5) Business Days after receipt of confirmation from the Agent that
it has received each Note subject to such assignment, the Borrower, at its own
expense, shall execute and deliver to the Agent, in exchange for each
surrendered Note, a new Note to the order of such assignee in an amount equal to
the amount assigned to such assignee pursuant to such assignment and, if the
assigning Lender has retained some portion of its obligations hereunder, a new
Note to the order of the assigning Lender in an amount equal to the amount
retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such assignment and shall otherwise be in
substantially the form of the assigned Notes. The surrendered Notes shall be
canceled and returned to the Borrower.
Section 18.4 PARTICIPATIONS. Each Lender may sell participations to one
or more Lenders or other entities in all or a portion of such Lender's rights
and obligations under this Agreement and the other Loan Documents; PROVIDED that
(a) any such sale or participation shall not affect the rights and duties of the
selling Lender hereunder, (b) such participation shall not entitle such
participant to any rights or privileges under this Agreement or any Loan
Documents, including without limitation, rights granted to the Lenders under
Section 4.8, Section 4.9 and Section 4.10, (c) such participation shall not
entitle the participant to the right to approve waivers, amendments or
modifications, (provided that the Lender granting the participation interest
shall not be prohibited from granting any participant (in the participation
agreement to be entered into between the Lender and such participant) the right
to approve waivers, amendments or modifications if any such waiver, amendment or
modification would (i) extend the Maturity Date or reduce the rate or extend the
time of payment of interest on the Loans or any fees payable in respect thereof
or reduce the principal amount thereof or increase the amount of the
participant's participation over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Commitments or any amendment to the Borrowing Base shall not
constitute a change in the terms of such participation, and that an increase in
any Commitment or Loan shall be permitted without the consent of any participant
if the participant's participation is not increased as a result thereof) or (ii)
constitute a consent to the assignment or transfer by the Borrower of any of its
rights or obligations under this Agreement), (d) such participant shall have no
direct rights against the Borrower, (e) such sale is effected in
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accordance with all applicable laws, and (f) such participant shall not be a
Person Controlling, Controlled by or under common Control with, or which is not
otherwise free from influence or control by any of the Borrower or REA.
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Section 18.5 PLEDGE BY LENDER. Any Lender may at any time pledge all or
any portion of its interest and rights under this Agreement (including all or
any portion of its Note) to any of the twelve Federal Reserve Lenders organized
under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such
pledge or the enforcement thereof shall release the pledgor Lender from its
obligations hereunder or under any of the other Loan Documents.
Section 18.6 NO ASSIGNMENT BY BORROWER. The Borrower shall not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of each of the Lenders.
Section 18.7 DISCLOSURE. The Borrower and REA agree that in addition to
disclosures made in accordance with standard banking practices any Lender may
disclose information obtained by such Lender pursuant to this Agreement to
BankBoston Securities, Inc., assignees or participants and potential assignees
or participants hereunder. The Agent and each Lender shall otherwise use
reasonable efforts to hold any confidential information which it may receive
from the Borrower or REA pursuant to this Agreement in confidence, except for
disclosure to (i) legal counsel, accountants and other professional advisors to
the Agent, any Lender, any assignee, participant, potential assignee or
participant, (ii) regulatory officials having jurisdiction over Agent, any
Lender or any assignee, participant, potential assignee or participant, and
(iii) as required by law or legal process or in connection with any legal
proceeding to which the Agent, any Lender or any assignee, participant,
potential assignee or participant is a party. Confidential information shall not
include any information which is or subsequently becomes publicly available, or
prior to the delivery to the Agent or the Lenders hereunder is within the
possession of such party, or is disclosed with the prior written approval of the
Borrower.
Section 18.8 AMENDMENTS TO MORTGAGES. Upon any such assignment or
participation, the Borrower, REA and the Guarantors shall, upon the request of
the Agent, enter into such documents as may be reasonably required by the Agent
to modify the Loan Documents to reflect such assignment or participation.
Section 19 NOTICES.
Each notice, demand, election or request provided for or permitted to
be given pursuant to this Agreement (hereinafter in this Section 19 referred to
as "Notice"), but specifically excluding to the maximum extent permitted by law
any notices of the institution or commencement of foreclosure proceedings, must
be in writing and shall be deemed to have been properly given or served by
personal delivery or by sending same by overnight courier or by depositing same
in the United States Mail, postpaid and registered or certified, return receipt
requested, or as expressly permitted herein, by telegraph, telecopy, telefax or
telex, and addressed as follows:
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If to the Agent or BankBoston:
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
With a copy to:
BankBoston, N.A.
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Jay Johns
Telecopy No.: (770) 390-8434
If to the Borrower:
American Real Estate Investment, L.P.
620 West Germantown Pike
Suite 200
Plymouth Meeting, Pennsylvania 19462
Attn: Stephen Butte
Telecopy No.: (610) 834-9560
If to REA:
American Real Estate Investment Corporation
620 West Germantown Pike
Suite 200
Plymouth Meeting, Pennsylvania 19462
Attn: Stephen Butte
Telecopy No.: (610) 834-9560
and to any Lender which may hereafter become a party to this Agreement, at such
address as may be designated by such Lender. Each Notice shall be effective upon
being personally delivered or upon being sent by overnight courier or upon being
deposited in the United States Mail as aforesaid. The time period in which a
response to such Notice must be given or any action taken with respect thereto
(if any), however, shall commence to run from the date of receipt if personally
delivered or sent by overnight courier, or if so deposited in the United States
Mail, the earlier of three (3) Business Days following such deposit or the date
of receipt as disclosed on the return receipt. Rejection or other refusal to
accept or the inability to deliver
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because of changed address for which no notice was given shall be deemed to be
receipt of the Notice sent. By giving at least fifteen (15) days prior Notice
thereof, the Borrower, a Lender or Agent shall have the right from time to time
and at any time during the term of this Agreement to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.
Section 20 RELATIONSHIP.
The relationship between each Lender and the Borrower is solely that of
a lender and borrower, and nothing contained herein or in any of the other Loan
Documents shall in any manner be construed as making the parties hereto
partners, joint venturers or any other relationship other than lender and
borrower.
Section 21 GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.
THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS
OTHERWISE SPECIFICALLY PROVIDED HEREIN OR THEREIN, SHALL FOR ALL PURPOSES BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH STATE (EXCLUDING
THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH OF THE BORROWER, REA
AND THE GUARANTORS AGREE THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING
MADE UPON THE BORROWER, REA OR THE GUARANTOR S BY MAIL AT THE ADDRESS SPECIFIED
IN Section 19. EACH OF THE BORROWER, REA AND THE GUARANTORS HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
Section 22 HEADINGS.
The captions in this Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
Section 23 COUNTERPARTS.
This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement
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it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
Section 24 ENTIRE AGREEMENT, ETC.
The Loan Documents express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated, except as provided
in Section 27.
Section 25 WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.
EACH OF THE BORROWER, REA, THE GUARANTORS, THE AGENT AND THE LENDERS
HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF
THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY
PROHIBITED BY LAW, THE BORROWER, REA, AND THE GUARANTORS HEREBY WAIVE ANY RIGHT
THEY MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE BORROWER, REA, AND THE GUARANTORS (A) CERTIFY THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR THE AGENT HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR THE AGENT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGE THAT THE
AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS Section 25. THE BORROWER, REA AND
THE GUARANTORS ACKNOWLEDGE THAT THEY HAVE HAD AN OPPORTUNITY TO REVIEW THIS
Section 25 WITH THEIR LEGAL COUNSEL AND THAT THE BORROWER, REA AND THE
GUARANTORS AGREE TO THE FOREGOING AS THEIR FREE, KNOWING AND VOLUNTARY ACT.
Section 26 DEALINGS WITH THE BORROWER.
The Lenders and their Affiliates may accept deposits from, extend
credit to and generally engage in any kind of banking, trust or other business
with the Borrower, REA, the Guarantors and their respective Subsidiaries or any
of their Affiliates regardless of the capacity of the Lender hereunder.
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Section 27 CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Agreement, any consent
or approval required or permitted by this Agreement may be given, and any term
of this Agreement or of any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower, REA or the
Guarantors of any terms of this Agreement or such other instrument or the
continuance of any Default or Event of Default may be waived (either generally
or in a particular instance and either retroactively or prospectively) with, but
only with, the written consent of the Majority Lenders. Notwithstanding the
foregoing, none of the following may occur without the written consent of each
Lender: a decrease in the rate of interest on or a change in the term of the
Notes; a change in the amount of the Commitments of the Lenders; a forgiveness,
reduction or waiver of the principal of any unpaid Loan or any interest thereon
or fee payable under the Loan Documents; a change in the amount of any fee
payable to a Lender hereunder; the postponement of any date fixed for any
payment of principal of or interest on the Loan; an extension of the Maturity
Date; a change in the manner of distribution of any payments to the Lenders or
the Agent; the release of the Borrower, REA, any Guarantor, or any Collateral
except as otherwise provided herein; an amendment of the definition of Majority
Lenders or of any requirement for consent by all of the Lenders; any
modification to require a Lender to fund a pro rata share of a request for an
advance of the Loan made by the Borrower other than based on its Commitment
Percentage; an amendment to this Section 27; an amendment of any provision of
this Agreement or the Loan Documents which requires the approval of all of the
Lenders or the Majority Lenders to require a lesser number of Lenders to approve
such action; any amendment, modification or waiver of the definition of
Borrowing Base or any definition of a term therein; or any amendment,
modification or waiver of the financial covenants contained in Section 9 of this
Agreement or any definition of a term therein. The provisions of Section 14 may
not be amended without the written consent of the Agent. No waiver shall extend
to or affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent or
any Lender in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon any of the
Borrower, REA or the Guarantors shall entitle the Borrower, REA or any Guarantor
to other or further notice or demand in similar or other circumstances.
Section 28 SEVERABILITY.
The provisions of this Agreement are severable, and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
Section 29 TIME OF THE ESSENCE.
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Time is of the essence with respect to each and every covenant,
agreement and obligation of the Borrower, REA and the Guarantors under this
Agreement and the other Loan Documents.
Section 30 NO UNWRITTEN AGREEMENTS.
THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
Section 31 REMEDIES OF THE BORROWER.
In the event that a claim is made that the Agent has, or the Lenders
have, acted unreasonably or unreasonably delayed acting in any case where by law
or under this Agreement or the other Loan Documents, the Agent has, or the
Lenders have an obligation to act reasonably or promptly, each of the Borrower,
REA and the Guarantors agrees to the extent permitted by law, that neither the
Agent nor the Lenders shall be liable for any monetary damages, and the sole
remedy of the Borrower, REA and the Guarantors shall be limited to commencing an
action seeking injunctive relief or declaratory judgment. In any action or
proceeding to determine whether the Agent has, or the Lenders have, acted
reasonably or promptly, each of the Borrower, REA and the Guarantors agrees to
the extent permitted by law, that neither the Agent nor the Lenders nor their
respective agents shall be liable for any monetary damages, and the sole
remedies of the Borrower, REA and the Guarantors shall be limited to commencing
an action seeking injunctive relief or declaratory judgment. The parties hereto
agree that any action or proceeding to determine whether the Agent has, or the
Lenders have, acted reasonably shall be determined by an action seeking
declaratory judgment.
Section 32 REA GUARANTY
Section 32.1 THE GUARANTY. In order to induce the Lenders and the Agent
to enter into this Agreement and to extend credit hereunder and in recognition
of the direct benefits to be received by REA from the proceeds of the Loans, REA
hereby agrees with the Agent and each of the Lenders as follows: REA hereby
unconditionally and irrevocably guarantees as primary obligor and not merely as
surety the full and prompt payment and performance when due, whether upon
maturity, by acceleration or otherwise, of any and all of the Obligations. If
any or all of the Obligations becomes due and payable hereunder, REA
unconditionally promises to pay such indebtedness to the Lenders or order, on
written demand, together with any and all reasonable expenses which may be
incurred by the Lenders in collecting any of the Obligations, and until paid to
the Lenders, such sums shall bear interest at the interest rate payable on
overdue amounts set forth in Section 4.12.
Section 32.2 BANKRUPTCY. Additionally, REA unconditionally and
irrevocably guarantees the payment and performance of any and all of the
Obligations to the Lenders and the Agent whether
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or not then due or payable by the Borrower upon the occurrence in respect of the
Borrower of any of the events specified in Section 12.1A(h), (i) or (j), and
unconditionally and irrevocably promises to pay the Obligations to the Lenders,
or order, on demand, in lawful money of the United States.
Section 32.3 NATURE OF LIABILITY. The liability of REA hereunder is
exclusive and independent of any security for or other guaranty of the
Obligations whether executed by REA, any Guarantor or by any other party, and
the liability of REA hereunder shall not be affected or impaired by (a) any
direction as to application of payment by the Borrower or by any other party, or
(b) any other continuing or other guaranty, undertaking or maximum liability of
a Guarantor or of any other party as to the Obligations or (c) any payment on or
in reduction of any such other guaranty or undertaking, or (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, or (e)
any payment made to any Lenders on the indebtedness which such Lenders repay the
Borrower pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and REA waives any right to the
deferral or modification of its obligations hereunder by reason of any such
proceeding.
Section 32.4 INDEPENDENT OBLIGATION. This is a guaranty of payment and
performance and not of collection. The obligations of REA hereunder are
independent of the obligations of any Guarantor or the Borrower, and a separate
action or actions may be brought and prosecuted against REA whether or not
action is brought against any Guarantor or the Borrower and whether or not any
Guarantor or the Borrower be joined in any such action or actions. Any payment
or performance by the Borrower or other circumstance which operates to toll any
statute of limitations as to the Borrower shall operate to toll the statute of
limitations as to REA.
Section 32.5 AUTHORIZATION. REA authorizes the Agent and each of the
Lenders without notice or demand (except as shall be required by applicable
statue and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to:
(e) change the manner, place or terms of payment or
performance of, and/or change or extend the time of payment or performance of,
renew, increase, accelerate or alter, any of the Obligations (including any
increase or decrease in the rate of interest thereon), any security therefor, or
any liability incurred directly or indirectly in respect thereof, and the
guaranty herein made shall apply to the Obligations as so changed, extended,
renewed or altered;
(f) take and hold security for the payment and performance of
the Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by whomsoever at
any time pledged or mortgaged to secure, or howsoever securing, the Obligations
or any liabilities (including any of those hereunder) incurred directly or
indirectly in respect thereof or hereof, and/or any offset thereagainst;
(g) exercise or refrain from exercising any rights against
the Borrower, any Guarantor or any other Person or otherwise act or refrain from
acting;
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(h) release or substitute one or more of the Borrower, the
Guarantors, endorsers, and guarantors or other obligors;
(i) settle or compromise any of the Obligations, any security
therefor or any liability (including any of those hereunder) incurred directly
or indirectly in respect thereof or hereof, and may subordinate the payment of
all or any part thereof to the payment of any liability (whether due or not) of
the Borrower to its creditors other than the Lenders;
(j) apply any sums by whomsoever paid or howsoever realized
to any liability or liabilities of the Borrower to the Lenders regardless of
what liability or liabilities of the Borrower remain unpaid;
(k) consent to or waive any breach of, or any act, omission
or default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise amend, modify or supplement this Agreement or
any of such other instruments or agreements; and/or
(l) take any other lawful action which would, under otherwise
applicable principles of common law, give rise to a legal or equitable discharge
of REA from its liabilities under this Section 32.
Section 32.6 PARTIAL INVALIDITY. No invalidity, irregularity or
unenforceability of all or any part of the Obligations or of any security
therefore shall affect, impair or be a defense to this guaranty, and this
guaranty shall be primary, absolute, irrevocable and unconditional
notwithstanding the occurrence of any event or the existence of any other
circumstances which might constitute a legal or equitable discharge of a surety
or guarantor except payment in full of the Obligations.
Section 32.7 CONTINUING OBLIGATION. This guaranty is a continuing one
and all liabilities to which it applies or may apply under the terms hereof
shall be conclusively presumed to have been created in reliance hereon. No
failure or delay on the part of the Agent or any Lender in exercising any right,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise thereof or the exercise of
any other right, power or privilege. The rights and remedies herein expressly
specified are cumulative and not exclusive of any rights or remedies which the
Agent or any Lender would otherwise have. No notice to or demand on REA in any
case shall entitle REA to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent or any
Lender to any other or further action in any circumstances without notice or
demand. It is not necessary for the Agent or any Lender to inquire into the
capacity or powers of the Borrower or the officers, directors, partners or
agents acting or purporting to act on its behalf, and any indebtedness made or
created in reliance upon the professed exercised of such powers shall be
guaranteed hereunder.
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Section 32.8 RELIANCE. It is not necessary for the Agent or the other
Lenders to inquire into the capacity or powers of the Borrower or any Guarantor
or the officers, directors, partners or agents acting or purporting to act on
its behalf, and any Obligations made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
Section 32.9 SUBORDINATION. Any indebtedness of the Borrower now or
hereafter owing to REA is hereby subordinated to the Obligations and if the
Agent so requests at a time when an Event of Default exists, all such
indebtedness of the Borrower to REA shall be collected, enforced and received by
REA for the benefit of the Lenders and be paid over to the Agent on behalf of
the Lenders on account of the Obligations but without affecting or impairing in
any manner the liability of REA under the other provisions of this guaranty.
Prior to the transfer by REA of any note or negotiable instrument evidencing any
of the indebtedness of the Borrower to REA, REA shall mark such note or
negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, REA hereby
agrees with the Lenders that it will not exercise any right of subrogation which
it may at any time otherwise have as a result of this guaranty (whether
contractual, under Section 509 of the Bankruptcy Code, or otherwise) until all
Obligations have been paid in full in cash (it being understood that REA is not
waiving any right of subrogation that it may otherwise have but is only waiving
the exercise thereof as provided above).
Section 32.10 WAIVER.
(a) REA waives any right (except as shall be required by
applicable law and cannot be waived) to require the Agent or the other Lenders
to (i) proceed against the Borrower, any Guarantor or any other Person, (ii)
proceed against or exhaust any security held from the Borrower, any Guarantor or
any other Person or (iii) pursue any other remedy in the Agent's or the other
Lender's power whatsoever. REA waives (except as shall be required by applicable
law and cannot be waived) any defense to its obligations under this Section 32
based on or arising out of any defense of the Borrower, any Guarantor or any
other Person, other than payment and performance in full of the Obligations,
based on or arising out of the disability of the Borrower, any Guarantor or any
other person, or the unenforceability of the Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower
other than payment and performance in full of the Obligations. The Agent and the
other Lenders may, at their selection, foreclose on any security held by the
Agent or the other Lenders by one or more judicial or nonjudicial sales, whether
or not every aspect of any such sale is commercially reasonable (to the extent
such sale is permitted by applicable law), or exercise any other right or remedy
the Agent and the other Lenders may have against the Borrower or any other
party, or any security, without affecting or impairing in any way the liability
of REA hereunder except to the extent the Obligations have been paid or
performed. REA waives any defense arising out of any such election by the Agent
and the other Lenders, even though such election operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
REA against the Borrower or any other party or any security.
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(b) REA waives, except as shall be required by applicable law
and cannot be waived, all presentments, demands for performance, protests and
notices, including without limitation notices of nonperformance, notices of
protest, notices of dishonor, notices of acceptance of this guaranty, and
notices of the existence, creation of incurring of new or additional
Obligations. REA assumes all responsibility for being and keeping itself
informed of the financial condition and assets of the Borrower, and of all other
circumstances bearing upon the risk of nonpayment of the Obligations and the
nature, scope and extent of the risks which REA assumes and incurs hereunder,
and agrees that the Agent and the other Lenders shall have no duty to advise REA
of information known to them regarding such circumstances or risks. REA warrants
and agrees that each of the waivers set forth above is made with full knowledge
of its significance and consequences and that if any of such waivers are
determined to be contrary to any applicable law or public policy, such waivers
shall be effective only to the maximum extent permitted by law.
Section 32.11 NATURE OF LIABILITY. It is the desire and intent of REA
and the Lenders that this guaranty shall be enforced against REA to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If, however, and to the extent
that, the obligations of REA under this guaranty shall be adjudicated to be
invalid or unenforceable for any reason (including, without limitation, because
of any applicable state or federal law relating to fraudulent conveyances or
transfers), then, solely for purposes of this Section 32 and without relieving
the Borrower or any Guarantor of liability for the Obligations, the amount of
the Obligations shall be deemed to be reduced and REA shall pay the maximum
amount of the Obligations which would be permissible under applicable law.
Section 32.12 RIGHTS IN BANKRUPTCY. In the event of the business
failure of REA or if there shall be pending any bankruptcy or insolvency case or
proceeding with respect to REA under federal bankruptcy law or any other
applicable law or in connection with the insolvency of REA or if a liquidator,
receiver, or trustee shall have been appointed for REA or REA's properties or
assets, the Agent or the Lenders may file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Agent and the Lenders allowed in any proceedings relative to REA, or any of
REA's properties or assets, and, irrespective of whether the Obligations of the
Borrower guaranteed hereby shall then be due and payable, by declaration or
otherwise, the Agent or the Lenders shall be entitled and empowered to file and
prove a claim for the whole amount of any sum or sums owing with respect to the
Obligations of the Borrower guaranteed hereby, and to collect and receive any
moneys or other property payable or deliverable on any such claim. REA covenants
and agrees that upon the commencement of a voluntary or involuntary bankruptcy
proceeding by or against Borrower, REA shall not seek a supplemental stay or
otherwise pursuant to 11 U.S.C. Section 105 or any other provision of the
Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law
(whether statutory, common law, case law, or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable, to
stay, interdict, condition, reduce or inhibit the ability of the Agent or the
Lenders to enforce any rights of the Agent or the Lenders against REA by virtue
of this guaranty or otherwise.
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Section 32.13 SET-OFF. REA hereby grants to each Lender, as security
for the full and prompt payment and performance of REA's obligations hereunder,
a continuing lien on and security interest in any and all securities or other
property belonging to REA now or hereafter held by such Lender and in any and
all deposits (general or specific, time or demand, provisional or final,
regardless of currency, maturity, or the branch of such Lender where the
deposits are held) now or hereafter held by such Lender and other sums credited
by or due from such Lender to REA or subject to withdrawal by REA; and
regardless of the adequacy of any collateral or other means of obtaining
repayment of such obligations, during the continuance of any Event of Default
under the Notes or the other Loan Documents, each Lender may at any time and
without notice to REA set-off and apply the whole or any portion or portions of
any or all such deposits and other sums against amounts payable under this
guaranty, whether or not any other Person or Persons could withdraw money
therefrom. Any security now or hereafter held by or for REA and provided by the
Borrower, or by anyone on Borrower's behalf, in respect of liabilities of REA
hereunder shall be held in trust for the Lenders as security for the liabilities
of REA hereunder.
Section 32.14 ASSIGNMENT. This guaranty is assignable by any Lender in
whole or in part in conjunction with any assignment of the Notes or portions
thereof, and any assignment hereof or any transfer or assignment of the Notes or
portions thereof by such Lender shall operate to vest in any such assignee the
rights and powers, in whole or in part, as appropriate, herein conferred upon
and granted to such Lender.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the undersigned have caused this Agreement
to be executed by its duly authorized representatives as of the date first set
forth above.
BORROWER:
AMERICAN REAL ESTATE INVESTMENT,
L.P., a Delaware limited partnership
By: American Real Estate Investment
Corporation, its general partner
By: /s/ Stephen J. Butte
Name: Stephen J. Butte
Title: Vice President
REA:
AMERICAN REAL ESTATE INVESTMENT
CORPORATION
By: /s/ Stephen J. Butte
Name: Stephen J. Butte
Title: Vice President
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115 Perimeter Center Place, N.E. BANKBOSTON, N.A., individually and as
Suite 500 Agent
Atlanta, Georgia 30346
(770) 390-6579 By: /s/ Jay G. Johns
(770) 390-8434 Fax Name: Jay G. Johns
Title: Vice President
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DLJ Capital Funding, Inc. DLJ CAPITAL FUNDING, INC.
277 Park Avenue
New York, New York 10172
Attn: Dana Klein By:/s/ Dana F. Klein
Facsimile: (212) 892-7542 Name: Dana F. Klein
Title: Vice President
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301 S. College Street (DC-6) FIRST UNION NATIONAL BANK,
Charlotte, North Carolina 28288-0600 individually and as documentation agent
Attn: Dan Sullivan
Dave Hoagland By:/s/ David Hoagland
(704) 383-6441 Name:David Hoagland
(704) 383-6205 Fax Title:Vice President
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One Citizens Plaza, 4th Floor CITIZENS BANK OF RHODE ISLAND
Providence, Rhode Island 02903
Attn: Ned Handy
John Cooper
(401) 455-5952 By: /s/ Craig E. Schermerhorn
(401) 455-5410 Fax Name: Craig E. Schermerhorn
Title: Vice President
122
<PAGE>
1735 Market Street, 4th Floor MELLON BANK, N.A.
Philadelphia, Pennsylvania 19103
Attn: Robert C. Howard
(215) 553-3622 By: /s/ Fredrick A. Felter
(215) 553-4081 Name: Fredrick A. Felter
(215) 553-3472 Fax Title: Vice President
123
<PAGE>
c/o ABS/CMBS Sector HARTFORD LIFE AND ANNUITY
Post Office Box 1744 INSURANCE COMPANY
Hartford, Connecticut 06144-1744
Attn: Don O'Neill By: Hartford Investment Services, Inc.,
(860) 297-6733 Its Agent and Attorney-in-Fact
(860) 297-8883 Fax
By: /s/ Dennis F. Kraft
Name: Dennis F. Kraft
Title: Senior Vice President
124
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE JUNE 30, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,791
<SECURITIES> 0
<RECEIVABLES> 15,311
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,375
<PP&E> 565,022
<DEPRECIATION> (13,298)
<TOTAL-ASSETS> 576,201
<CURRENT-LIABILITIES> 12,386
<BONDS> 361,297
0
95,685<F1>
<COMMON> 0
<OTHER-SE> 106,833
<TOTAL-LIABILITY-AND-EQUITY> 576,201
<SALES> 36,482
<TOTAL-REVENUES> 36,482
<CGS> 16,071
<TOTAL-COSTS> 16,071
<OTHER-EXPENSES> 3,690<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,385<F3>
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,284<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,620
<EPS-BASIC> .49
<EPS-DILUTED> .47
<FN>
<F1>REPRESENTS MINORITY INTEREST
<F2>REPRESENTS LOSS FROM EQUITY METHOD INVESTMENT AND MINORITY INTEREST.
<F3>REPRESENTS INTEREST EXPENSE AND PREFERRED DIVIDENDS.
<F4>REPRESENTS GAINS ON PROPERTY SALES.
</FN>
</TABLE>
