UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________
COMMISSION FILE NO. 1-12328
--------------------
CHELSEA GCA REALTY, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 22-3251332
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
103 EISENHOWER PARKWAY, ROSELAND, NEW JERSEY 07068
(Address of principal executive offices - zip code)
(201) 228-6111
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on
- ------------------- which registered
Common stock, $0.01 par value ------------------------
New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-- --
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Based on closing sales price on March 20, 1997 of $36.625 the aggregate market
value of the voting stock held by non-affiliates of the registrant was
$504,663,530.
The number of shares outstanding of the registrant's common stock,
$0.01 par value was 13,795,834 at March 20, 1997.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive Proxy Statement relating to its 1997
Annual Meeting of Shareholders are incorporated by reference into Part III as
set forth herein.
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Chelsea GCA Realty, Inc. (the "Company") is a self-administered and self-managed
real estate investment trust ("REIT") formed through the merger of The Chelsea
Group ("Chelsea") and Ginsburg Craig Associates ("GCA"). The Company made its
initial public offering of common stock on November 2, 1993 (the "IPO") and
simultaneously became the managing general partner of Chelsea GCA Realty
Partnership, L.P. (the "Operating Partnership"), a partnership that owns,
develops, redevelops, leases, markets and manages upscale and fashion-oriented
manufacturers' outlet centers. At the end of 1996, the Company owned and
operated 18 centers (the "Properties") with a total of approximately 3.6 million
square feet of gross leasable area ("GLA") in 10 states. The Company also has
properties under development including one new center in Wrentham,
Massachusetts, outside of Boston. The Company's existing portfolio includes
properties in or near New York City, Los Angeles, San Francisco, Sacramento,
Portland (Oregon), Kansas City, Atlanta, Cleveland, the Napa Valley, Palms
Springs and the Monterey Peninsula.
The Company's executive offices are located at 103 Eisenhower Parkway, Roseland,
New Jersey 07068 (telephone 201-228-6111). The Company was incorporated in
Maryland on August 24, 1993.
The Company is taxed as a REIT under the provisions of the Internal Revenue
Code. The Company generally will not be taxed at the corporate level on income
it currently distributes to its shareholders, provided it distributes at least
95% of its taxable income each year.
RECENT DEVELOPMENTS
Between the IPO and December 31, 1996, the Company developed and opened
approximately 2.0 million square feet of new GLA, contained in seven new centers
and the expansion of eleven existing centers, a 123% increase. Of the new GLA,
1,112,000 square feet was in the seven newly developed centers and 878,000
square feet was in the expansions of eleven existing centers. Approximately $200
million of such development and expansion costs were funded with borrowings
along with the balance funded with cash proceeds from the IPO and undistributed
funds from operations.
A summary of newly developed centers and expansions since the Company's IPO
through the end of 1996 is shown below:
<TABLE>
<CAPTION>
PROPERTY Opening Date(s) GLA (sf) No. of
Stores
- --------------------------------------------- -------------------------------- ------------------ ------------------
<S> <C> <C> <C>
New Centers:
Clinton Crossing..................... 8/96 272,000 67
North Georgia........................ 5/96 292,000 76
Camarillo Premium Outlets............ 3/95, 6/95 149,000 48
Petaluma Village..................... 12/94 150,000 43
Napa Premium Outlets................. 12/94 72,000 14
Santa Fe Factory Stores.............. 12/93 125,000 44
Solvang Designer Outlets (1)......... 12/94 52,000 15
------------------ ------------------
Total Newly Developed Centers........ 1,112,000 307
================== ==================
EXPANSIONS:
Desert Hills......................... 12/93, 6/95 203,000 46
Aurora Farms......................... 12/93, 5/94, 8/94, 11/95 195,000 35
Woodbury Common...................... 12/93, 12/94, 9/95, 10/95 110,000 20
Napa Premium Outlets................. 3/95, 6/95 99,000 35
Camarillo Premium Outlets............ 11/95, 11/96 131,000 28
Columbia Gorge....................... 6/94, 9/94 46,000 9
Petaluma Village..................... 12/95, 3/96, 6/96 46,000 10
Patriot Plaza........................ 2/95, 5/95 35,000 9
Folsom............................... 12/96 22,000 1
Other................................ (9,000) (1)
------------------ ------------------
TOTAL EXPANSIONS....................... 878,000 192
================== ==================
NOTE: (1) The Company is the sole general partner and has a
50% interest in the property.
</TABLE>
<PAGE>
The Company is in the process of constructing one new project with 230,000
square feet of GLA, in Wrentham, MA (near the junction of Interstates 95 and
495, south of Boston) and a 270,000 square foot expansion of Woodbury Common
(Central Valley, NY), its flagship center in the New York City metropolitan
market. These projects are expected to open during late 1997 and early 1998.
On February 7, 1997, the Company signed a letter of intent to acquire Waikele
Factory Outlets, a 214,000 square foot manufacturer's outlet center located 15
miles west of Honolulu, Hawaii. Closing has been scheduled for the end of March
1997 and is subject to final due diligence review and documentation. The 17-acre
outlet center property is part of Waikele Center, a retail development that also
contains 522,000 square feet of power-center tenants including Borders Books,
Computer City, Eagle Hardware, Kmart and Office Max. Waikele Center is a
shopping destination for international tourists as well as local residents.
Waikele Factory Outlets is 100% leased to 52 tenants including Anne Klein, BCBG,
Benetton, Bose, Carter's Childrenswear, Donna Karan, Guess?, Kenneth Cole,
Levi's, Off 5th-Saks Fifth Avenue Outlet and Villeroy & Boch.
ORGANIZATION OF THE COMPANY
The Company was organized to combine Chelsea and GCA, two leading outlet center
development companies, into the Operating Partnership, providing for greater
access to the public and private capital markets. All of the Company's assets
are held by and all of its business activities conducted through the Operating
Partnership. The Company is the sole general partner of the Operating
Partnership (which owned 72.1% in the Operating Partnership as of December 31,
1996) and has full and complete control over the management of the Operating
Partnership and each of the Properties.
THE MANUFACTURERS' OUTLET BUSINESS
Manufacturers' outlets are manufacturer-operated retail stores that sell
primarily first-quality, branded goods at significant discounts from regular
department and specialty store prices. Manufacturers' outlet centers offer
numerous advantages to both consumer and manufacturer: by eliminating the third
party retailer, manufacturers are often able to charge customers lower prices
for brand name and designer merchandise; manufacturers benefit by being able to
sell first quality in-season, as well as out-of-season, overstocked or
discontinued merchandise without compromising their relationships with
department stores or hampering the manufacturers' brand name. In addition,
outlet stores enable manufacturers to optimize the size of production runs while
maintaining control of their distribution channels.
BUSINESS OF THE COMPANY
The Company believes its strong tenant relationships, high-quality property
portfolio and managerial expertise give it significant advantages in the
manufacturers' outlet business.
Strong Tenant Relationships. The Company maintains strong tenant relationships
with high fashion, upscale manufacturers that have a selective presence in the
outlet industry, such as Ann Taylor, Brooks Brothers, Cole Haan, Donna Karan,
Joan & David, Jones New York, Nautica, Polo/Ralph Lauren and Tommy Hilfiger, as
well as with national brand-name manufacturers such as Nine West, Phillips-Van
Heusen (Bass, Geoffrey Beene, Van Heusen) and Sara Lee (Champion, Hanes, Coach
Leather, Mark Cross). The Company believes that its ability to draw from both
groups is an important factor in providing broad customer appeal and higher
tenant sales.
High Quality Property Portfolio. The Properties generated weighted average
reported tenant sales during 1996 of $345 per square foot. A significant number
of the Company's tenants, including Ann Taylor, Brooks Brothers, Burberrys,
Cole-Haan, Donna Karan, Emanuel/Emanuel Ungaro, Joan & David, Jones New York,
Nike, Nine West, Polo/Ralph Lauren Factory Store, Royal Doulton, Timberland,
Tommy Hilfiger and Waterford/Wedgwood, reported that the top store in their
outlet chain during 1996 (as measured by sales per square foot or gross sales)
was in one of the Company's centers. The Company believes that the quality of
its centers gives it significant advantages in attracting customers and
negotiating multi-lease transactions with tenants.
Management Expertise. The Company believes it has a competitive advantage in the
manufacturers' outlet business as a result of its experience in the business,
long-standing relationships with tenants and expertise in the development and
operation of manufacturers' outlet centers. The Company's senior officers have
been recognized leaders in the outlet industry over the last two decades. The
Company was the first recipient of the Value Retail News Award of Excellence. In
addition, management developed a number of the earliest and most successful
outlet centers in the industry, including Liberty Village (one of the first
manufacturers' outlet centers in the U.S.) in 1981, Woodbury Common in 1985, and
Desert Hills and Aurora Farms in 1990. Since the IPO, the Company has added
significantly to its senior management in the areas of development, leasing and
property management without increasing general and administrative expenses as a
percentage of total revenues; additionally, the Company intends to continue to
invest in systems and controls to support the planning, coordination and
monitoring of its activities.
GROWTH STRATEGY
The Company seeks growth through increasing rents in its existing centers;
developing new centers and expanding existing centers; and acquiring and
redeveloping centers.
Increasing Rents at Existing Centers. The Company's leasing strategy includes
aggressively marketing available space and maintaining a high level of
occupancy; providing for inflation-based contractual rent increases or periodic
fixed contractual rent increases in substantially all leases; renewing leases at
higher base rents per square foot; re-tenanting space occupied by
underperforming tenants; and continuing to sign leases that provide for
percentage rents.
Developing New Centers and Expanding Existing Centers. The Company believes
there will continue to be significant opportunities to develop manufacturers'
outlet centers across the United States. The Company intends to undertake such
development on a selective basis, and believes that it will have a competitive
advantage in doing so as a result of its development expertise, tenant
relationships and access to capital. The Company expects that the development of
new centers and the expansion of existing centers will continue to be a
substantial part of its growth strategy. The Company believes that its
development experience and strong tenant relationships enable it to determine
site viability on a timely and cost-effective basis.
Acquiring and Redeveloping Centers. The Company intends to selectively acquire
individual properties and portfolios of properties that meet its strategic
investment criteria as suitable opportunities arise. The Company believes that
its extensive experience in the outlet center business, access to capital
markets, familiarity with real estate markets and advanced management systems
will allow it to evaluate and execute acquisitions competitively. Furthermore,
management believes that the Company will be able to enhance the operation of
acquired properties as a result of its strong tenant relationships with both
national and upscale fashion retailers; and development, marketing and
management expertise as a full-service real estate organization. Additionally,
the Company may be able to acquire properties on a tax-advantaged basis through
the issuance of Operating Partnership units.
OPERATING STRATEGY
The Company's primary business objectives are to increase cash generated from
operations and to enhance the value of its properties and operations. The
Company plans to achieve these objectives through continuing efforts to improve
tenant sales and profitability, and to enhance the opportunity for higher base
and percentage rents.
Leasing. The Company pursues an active leasing strategy through long-standing
relationships with a broad range of tenants including manufacturers of men's,
women's and children's ready-to-wear, lifestyle apparel, footwear, accessories,
tableware, housewares, linens and domestic goods. Key tenants are placed in
strategic locations to draw customers into each center and to encourage shopping
at more than one store. The Company continually monitors tenant mix, store size,
store location and sales performance, and works with tenants to improve each
center through re-sizing, re-location and joint promotion.
Market and Site Selection. To ensure a sound long-term customer base, the
Company generally seeks to develop sites near densely-populated, high-income
metropolitan areas, and/or at or near major tourist destinations. While these
areas typically impose numerous restrictions on development and require
compliance with complex entitlement and regulatory processes, the Company
believes that they provide the most attractive long-term demographic
characteristics.
The Company generally seeks to develop sites that can support 200,000 to
500,000 square feet of GLA and that offer the long-term opportunity to dominate
their respective markets through a critical mass of tenants.
Marketing. The Company pursues an active, property-specific marketing strategy
using a variety of media including newspapers, television, radio, billboards,
regional magazines, guide books and direct mailings. The centers are marketed to
tour groups, conventions and corporations; additionally, each property
participates in joint destination marketing efforts with other area attractions
and accommodations. Virtually all consumer marketing expenses incurred by the
Company are reimbursable by tenants.
Property Design and Management. The Company believes that effective property
design and management are significant factors in the success of its properties
and works continually to maintain or enhance each center's physical plant,
original architectural theme and high level of on-site services. Each property
is designed to be compatible with its environment and is maintained to high
standards of aesthetics, ambiance and cleanliness in order to promote longer
visits and repeat visits by shoppers. Of the Company's 285 full-time and 71
part-time employees, 212 full-time and 71 part-time employees are involved in
on-site maintenance, security, administration and marketing. Centers are
generally managed by an on-site property manager with oversight from a director
of property management.
FINANCING
The Company's financing strategy is to maintain a strong, flexible financial
position by: (i) maintaining a conservative level of leverage, (ii) extending
and sequencing debt maturity dates, (iii) managing floating interest rate
exposure and (iv) maintaining liquidity. Management believes these strategies
will enable the Company to access a broad array of capital sources, including
bank or institutional borrowings, secured and unsecured debt and equity
offerings.
It is the Company's policy to limit its borrowings to less than 40% of total
market capitalization (defined as the value of outstanding shares of common
stock on a fully diluted basis including conversion of partnership units to
common stock, plus total debt). Applying a December 31, 1996 closing price of
$34.625 per common share, the Company's ratio of debt to total market
capitalization was approximately 25% at December 31, 1996.
In January 1996, the Company's Operating Partnership completed a $100 million
public debt offering of 7.75% unsecured term notes due January 2001 (the "Term
Notes"), which are guaranteed by the Company. The five-year non-callable Term
Notes were priced at a discount of 99.952 to yield 7.85% to investors. Net
proceeds from the offering were used to pay down substantially all of the
borrowings under the Secured Facility.
In March 1996, the Company replaced its secured revolving credit facility (the
"Secured Facility") with a new unsecured $100 million revolving credit facility
(the "Unsecured Facility") that expires March 29, 1998. Interest on the
outstanding balance is payable monthly at a rate equal to the London Interbank
Offered Rate ("LIBOR") plus 1.75%, or the prime rate, at the Company's option.
In January 1997, the Unsecured Facility was amended and restated and the
interest rate on the line was reduced to LIBOR plus 1.45%. A fee on the unused
portion of the Unsecured Facility is payable quarterly at a rate of 0.25% per
annum. The Unsecured Facility was completely unused at December 31, 1996.
In October 1996, the Company's Operating Partnership completed a $100 million
offering of Remarketed Floating Rate Reset Notes (the "Reset Notes"), which are
guaranteed by the Company. The interest rate will reset quarterly and will equal
LIBOR plus 75 basis points during the first year. The spread and the spread
period for subsequent periods will be adjusted in whole or part at the end of
the first year, pursuant to an agreement with the underwriters. Unless
previously redeemed, the Reset Notes will have a final maturity of October 23,
2001. Net proceeds from the offering were used to repay all of the borrowings
under the Unsecured Facility and for working capital.
COMPETITION
The Properties compete for retail consumer spending on the basis of the diverse
mix of retail merchandising and value oriented pricing. Manufacturers' outlet
centers have established a niche capitalizing on consumers' growing desire for
value-priced goods. The Properties compete for customer spending with other
outlet locations, traditional shopping malls, off-price retailers, and other
sales channels in the retail industry. The Company believes that the Properties
are generally the leading manufacturers' outlet centers in each market. The
Company carefully considers the degree of existing and planned competition in
each proposed area before deciding to build a new center.
ENVIRONMENTAL MATTERS
The Company is not aware of any environmental liabilities relating to the
Properties that would have a material impact on the Company's financial position
and results of operations.
PERSONNEL
As of December 31, 1996, the Company had 285 full-time and 71 part-time
employees. None of the employees are subject to any collective bargaining
agreements, and the Company believes it has good relations with its employees.
<PAGE>
ITEM 2. PROPERTIES
As of December 31, 1996, the Company had 18 operating outlet centers. Of the 18
operating centers, 15 are owned 100% in fee; one, Solvang Designer Outlets, is
50%-owned through a limited partnership; and two, American Tin Cannery Premium
Outlets and Lawrence Riverfront Factory Outlets, are held under long-term
leases. The Company manages all of its Properties.
Approximately 38% and 40% of the Company's revenues for the years ended December
31, 1996 and 1995, respectively, were derived from the Company's two centers
with the highest revenues, Woodbury Common Premium Outlets and Desert Hills
Premium Outlets. The loss of either center or a material decrease in revenues
from either center for any reason may have a material adverse effect on the
Company. In addition, approximately 44% and 45% of the Company's revenues for
the years ended December 31, 1996 and 1995, respectively, were derived from the
Company's centers in California. Set forth in the table below is certain
property information as of December 31, 1996:
<TABLE>
<CAPTION>
YEAR GLA NO. OF
NAME/LOCATION OPENED (SQ. FT.) STORES CERTAIN TENANTS
------------ -------------- ------------ ---------------------------------------
<S> <C> <C> <C> <C>
Woodbury Common.......................... 1985 573,000 151 Brooks Brothers, Calvin Klein, Donna
Central Valley, NY Karan, Polo/Ralph Lauren, Van Heusen,
(New York City Metro area) Coach Leather
Desert Hills............................. 1990 432,000 106 Bose, Coach Leather, Donna Karan
Cabazon, CA (Palm Springs-Los Angeles Eddie Bauer, Nautica, Tommy Hilfiger
area)
Aurora Premium Outlets................... 1987 294,000 66 Ann Taylor, Brooks Brothers, Carters,
Aurora, OH (Cleveland metro area) Liz Claiborne, Reebok, Off 5th-Saks
North Georgia............................ 1996 292,000 76 Bose, Brooks Brothers, Donna Karan,
Dawsonville, GA (Atlanta metro area) Off 5th-Saks Fifth Ave, Van Heusen
Camarillo Premium Outlets............... 1995 280,000 86 Asics, Barneys New York, Jones New
Camarillo, CA (Los Angeles metro area) York Levi's, Nine West, Off 5th-Saks
Fifth Ave
Clinton Crossing......................... 1996 272,000 67 Bose, Coach Leather, Donna Karan,
Clinton, CT (I-95/NY-New England corridor) Off 5th-Saks Fifth Ave, Polo/Ralph
Lauren
Folsom Premium Outlets................... 1990 211,000 58 Bass, Jones New York, Levi's, Nike
Folsom, CA (Sacramento metro area) Nine West, Off 5th-Saks Fifth Ave
Petaluma Village......................... 1994 196,000 53 Ann Taylor, Brooks Brothers, Levi's,
Petaluma, CA (San Francisco metro area) Reebok, Off 5th-Saks Fifth Ave
Napa Premium Outlets..................... 1994 171,000 49 Cole-Haan, Dansk, Ellen Tracy, Esprit,
Napa, CA (Napa Valley) J.Crew, Nautica, Timberland
Columbia Gorge........................... 1991 148,000 42 Carters, Harry & David, Levi's,
Troutdale, OR (Portland metro area) Maidenform, Mikasa, Norm Thompson
Lawrence Riverfront...................... 1990 148,000 44 Bass, J.Crew, Jones New York Country,
Lawrence, KS (Kansas City metro area) Mikasa
Liberty Village.......................... 1981 145,000 58 Calvin Klein, Donna Karan, Ellen Tracy,
Flemington, NJ (New York-Phila. metro area) Tommy Hilfiger, Waterford
American Tin Cannery..................... 1987 137,000 49 Anne Klein, Carole Little, Joan &
Pacific Grove, CA (Monterey Peninsula) David, London Fog, Reebok, Rockport
Santa Fe Factory Stores.................. 1993 125,000 44 Brooks Brothers, Cole-Haan, Dansk,
Santa Fe, NM Donna Karan, Joan & David, Mondi
Patriot Plaza............................ 1986 76,000 11 Lenox, Polo/Ralph Lauren, Westpoint
Williamsburg, VA (Norfolk-Richmond area) Stevens
Solvang Designer Outlets................. 1994 52,000 15 Bass, Donna Karan, Ellen Tracy,
Solvang, CA (Southern California area) Nautica
Mammoth Premium Outlets.................. 1990 35,000 11 Bass, Polo/Ralph Lauren
Mammoth Lakes, CA (Yosemite National Park)
St. Helena Premium Outlets............... 1992 23,000 9 Brooks Brothers, Donna Karan, Joan &
St. Helena, CA (Napa Valley) David, Coach Leather
-------------- ------------
Total................................. 3,610,000 995
============== ============
</TABLE>
<PAGE>
The following sets forth certain information relating to each of the Properties:
Woodbury Common, Central Valley, New York. Woodbury Common Premium Outlets
opened in November 1985 and is located approximately 50 miles north of New York
City at the Harriman exit of the New York State Thruway (Interstate 87).
Significant expansions of 19,000 and 85,000 square feet opened in 1995 and 1993,
respectively. The center currently has one of the largest single-center
concentrations of upscale/designer outlet stores in the United States.
Management believes that this is the most successful outlet center in the New
York-New Jersey Metropolitan area.
Desert Hills, Cabazon, California. Desert Hills Premium Outlets opened in August
1990 and is located on Interstate 10, 16 miles west of Palm Springs and 75 miles
east of Los Angeles. An expansion of 191,000 square feet opened in 1995. The
center serves the population of southern California as well as tourists.
Management believes this is the most successful outlet center in southern
California.
Aurora Premium Outlets, Aurora, Ohio. Founded over sixty years ago, Aurora
Premium Outlets opened as an outlet center in 1987 and is located approximately
30 miles southeast of Cleveland. Expansions of 27,000, 130,000 and 38,000 square
feet opened in 1995, 1994, and 1993, respectively.
North Georgia, Dawsonville, Georgia. Phase I of North Georgia Premium Outlets
opened in May 1996 and is located approximately 40 miles north of Atlanta on
State Road 400.
Camarillo Premium Outlets, Camarillo, California. Camarillo Premium Outlets
opened in March 1995 and is located 48 miles north of Los Angeles, about 55
miles south of Santa Barbara on Highway 101. Expansions of 54,000 and 77,000
square feet opened in 1996 and 1995, respectively.
Clinton Crossing, Clinton, Connecticut. Clinton Crossing Premium Outlets opened
in August 1996 and is located approximately 22 miles east of New Haven on I-95
at Exit 63.
Folsom Premium Outlets (formerly known as Natoma Station Factory Outlets),
Folsom, California. Folsom Premium Outlets opened in March 1990 and is located
approximately 20 miles east of Sacramento. An expansion of 22,000 square feet
opened in 1996.
Petaluma Village, Petaluma, California. Petaluma Village Premium Outlets opened
in November 1994. Expansions of 30,000 and 16,000 square feet opened in 1996 and
1995, respectively. The center is located one hour north of San Francisco and 40
miles north of the Golden Gate Bridge, in Sonoma County on Highway 101.
Napa Premium Outlets, Napa, California. Napa Premium Outlets opened in December
1994. The center is located on Highway 29, the main tourist corridor of the Napa
Valley wine region in Northern California, 20 miles south of St. Helena Factory
Stores, a smaller Company-owned center. Expansions totaling 99,000 square feet
opened during 1995.
Columbia Gorge, Troutdale, Oregon. Columbia Gorge Premium Outlets opened in
April 1991 and is located on Interstate 84, 20 miles east of Portland and along
the Columbia River Gorge. Expansions totaling 46,000 square feet opened in 1994.
Lawrence Riverfront, Lawrence, Kansas. Lawrence Riverfront opened in April 1990
and is located approximately 40 miles west of Kansas City and 30 miles east of
Topeka. Lawrence is home to the University of Kansas. The property is held under
a long-term operating land lease expiring in 2007 (subject to renewal at the
Company's option until 2087) which provides for an annual rental increase based
on increases in the Consumer Price Index. Management believes that the terms of
this lease will not materially limit the growth in cash flow to be received by
the Company from this property.
Liberty Village, Flemington, New Jersey. Liberty Village Premium Outlets opened
in May 1981 and is located approximately 60 miles southwest of New York City and
40 miles north of Philadelphia. Designed in an authentic colonial style, Liberty
Village was the industry's first architecturally themed outlet village.
American Tin Cannery, Pacific Grove, California. The Company introduced the
manufacturers' outlet center concept to California in 1987 with the opening of
the American Tin Cannery Premium Outlets center on the Monterey Peninsula. The
center is a renovation of an existing structure along Cannery Row and is located
near the Monterey Bay Aquarium, minutes away from Carmel. It is approximately
110 miles south of San Francisco. A 10,000 square foot expansion opened in
January 1994. The property is held under a long-term lease expiring in 2012
(subject to renewal at the Company's option through 2022). The lease provides
for annual contingent payments to the landlord based on 20% of gross rents (as
defined) through 2004, escalating to 50% through its expiration in 2012. The
Company has not paid contingent rent since inception of the lease through 1996.
Management believes that the terms of this lease will not materially limit the
growth in cash flow to be received by the Company from this property.
Santa Fe Factory Stores, Santa Fe, New Mexico. Santa Fe Factory Stores opened in
December 1993 and is located on Interstate 25 at the intersection of Route 68,
the main road into historic Santa Fe.
Patriot Plaza, Williamsburg, Virginia. Patriot Plaza opened in December 1986 and
is located near the historic tourist village of Colonial Williamsburg, 50 miles
east of Richmond and 50 miles west of Virginia Beach/Norfolk metro market. Over
two million tourists visit Williamsburg, the restored former colonial capital,
each year. A 13,000 square foot addition opened during February 1995 and a
22,000 square foot adjacent center was acquired in May 1995.
Solvang Designer Outlets, Solvang, California. Solvang Designer Outlets opened
in December 1994 and is located off Highway 101, two and one-half hours north of
Los Angeles and thirty minutes northeast of Santa Barbara. The center is 50%
owned through a limited partnership.
Mammoth Premium Outlets, Mammoth Lakes, California. Mammoth Premium Outlets
opened in 1990. It is located 20 miles from the eastern entrance to Yosemite
National Park and five miles from the most popular skiing area in California.
St. Helena Premium Outlets (formerly Village Outlets of Napa Valley) St. Helena,
California. St. Helena Premium Outlets opened in November 1992 and is located in
the Napa Valley wine region in Northern California, on Route 29, the main
thoroughfare for the area. The center is 20 miles north of Napa Premium Outlets.
The Company rents approximately 23,000 square feet of office space in its
headquarters facility in Roseland, New Jersey and approximately 4,000 square
feet of office space for its west coast regional office in Newport Beach,
California.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently involved in any material litigation other than
routine litigation arising in the ordinary course of business and which is
either expected to be covered by liability insurance or have no material impact
on the Company's financial position and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the directors and executive officers of the
Company:
NAME AGE POSITION
---- --- --------
David C. Bloom....................... 40 Chairman of the Board (term
expires in 1999), President
and Chief Executive Officer
William D. Bloom..................... 34 Executive Vice President-
Strategic Relationships and
Director (term expires in 1997)
Brendan T. Byrne...................... 72 Director (term expires in 1998)
Robert Frommer........................ 62 Director (term expires in 1997)
Barry M. Ginsburg..................... 59 Vice Chairman and Director (term
expires in 1999)
Philip D. Kaltenbacher................ 59 Director (term expires in 1999)
Reuben S. Leibowitz................... 49 Director (term expires in 1997)
John D. Santoleri..................... 33 Director (term expires in 1998)
Leslie T. Chao........................ 40 Executive Vice President and
Chief Financial Officer
Thomas J. Davis....................... 41 Executive Vice President-Asset
Management
Bruce Zalaznick....................... 40 Executive Vice President-Real
Estate
Michael J. Clarke..................... 43 Vice President-Finance
Denise M. Elmer....................... 40 Vice President, General Counsel
and Secretary
Eric K. Helstrom...................... 38 Vice President-Architecture and
Construction
John R. Klein......................... 38 Vice President-Acquisitions and
Development
Gregory C. Link....................... 47 Vice President-Operations
Michele Rothstein..................... 38 Vice President-Marketing
Catherine A. Lassi.................... 37 Treasurer
Sharon M. Vuskalns.................... 33 Controller
David C. Bloom, Chairman of the Board and Chief Executive Officer since 1993 and
President since 1995. Mr. Bloom was a founder and principal of Chelsea, and was
President of Chelsea from 1985 to 1993. As Chairman of the Board, President and
Chief Executive Officer of the Company, he sets policy and coordinates and
directs all the Company's primary functions including development, leasing and
finance. Prior to founding Chelsea, he was an equity analyst with The First
Boston Corporation (now Credit Suisse First Boston Corporation) in New York. Mr.
Bloom graduated from Dartmouth College and received an MBA from Harvard Business
School.
William D. Bloom, Executive Vice President-Strategic Relationships since 1996
and Director since 1995. Mr. Bloom joined The Chelsea Group in 1986 and has been
responsible for the leasing of all of the Company's projects and was appointed
Executive Vice President-Leasing in 1993. In 1996, Mr. Bloom was named Executive
Vice President-Strategic Relationships and is responsible for developing and
maintaining relationships with major tenants. Prior to joining Chelsea GCA, he
was an institutional bond broker with Mabon Nugent in New York. Mr. Bloom
graduated from Boston University School of Management.
Brendan T. Byrne, Director since 1993. Since 1982, Mr. Byrne has been a senior
partner in the law firm of Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart &
Olstein. He previously served as Governor of New Jersey from 1974 to 1982,
Prosecutor Essex County (New Jersey), President of the Public Utility Commission
and Assignment Judge of the New Jersey Superior Court. He has also served as
Vice President of the National District Attorneys Association; Trustee of
Princeton University; Chairman of the Princeton University Council on New Jersey
Affairs; Chairman of the United States Marshals Foundation; and Chairman of the
National Commission on Criminal Justice Standards and Goals (1977). He serves on
a Board of the National Judicial College, is a former Commissioner of the New
Jersey Sports and Exposition Authority, and is a member of the board of
directors of New Jersey Bell Telephone Company, Elizabethtown Water Company,
Ingersoll-Rand Company and a former director of The Prudential Insurance Company
of America. Mr. Byrne graduated from Princeton University and received an LL.B.
from Harvard Law School.
Robert Frommer, Director since 1993. Since 1991, Mr. Frommer has been the
principal of Robert Frommer Associates, a real estate consulting firm. In 1992
he commenced a consulting assignment for PG&E Properties, Inc., a wholly-owned
subsidiary of PG&E Enterprises, the unregulated business unit of Pacific Gas and
Electric Company; and has been President of that subsidiary since 1993. From
1987 to 1991, he was President of The Harlan Company. From 1984 to 1987, he was
Vice President for Institutional Facilities for New York University. From 1972
to 1984 he was Executive Vice President of Urban Investment & Development
Company, then a wholly-owned subsidiary of Aetna Life & Casualty Company. Mr.
Frommer is a graduate of the Wharton School of the University of Pennsylvania,
and received an LL.B. from Yale Law School.
Barry M. Ginsburg, Vice Chairman and Director since 1993. Mr. Ginsburg was a
founder and principal of GCA and its predecessor companies from 1986 to 1993 and
has been involved during the last ten years in all aspects of outlet center
development and operations. As Vice Chairman of the Company, he is involved in a
range of activities including corporate strategy, investor relations, marketing,
leasing and international development. From 1966 through 1985, he was employed
by Dansk International Designs, Ltd. and was corporate Chief Operating Officer
and Director from 1980 to 1985. Dansk operated a chain of 31 manufacturers'
outlet stores. Mr. Ginsburg graduated from Colby College and received an MBA
from Cornell University.
Philip D. Kaltenbacher, Director since 1993. Since 1974, Mr. Kaltenbacher has
been Chairman of the Board of Directors and Chief Executive Officer of Seton
Company, a manufacturer of leather; health care products; industrial foams,
films, tapes, adhesives and laminates; and chemicals. Mr. Kaltenbacher was a
Commissioner of The Port Authority of New York and New Jersey from September
1985 through February 1993, and served as Chairman from September 1985 through
April 1990. Mr. Kaltenbacher graduated from Yale University and received an
LL.B. from Yale Law School.
Reuben S. Leibowitz, Director since 1993. Mr. Leibowitz is a Managing Director
of E.M. Warburg, Pincus & Co., LLC ("Warburg, Pincus"), a venture banking and
investment counseling firm. He has been associated with Warburg, Pincus since
1984. Mr. Leibowitz graduated from Brooklyn College, received an MBA from New
York University, a JD from Brooklyn Law School, and an LL.M. from New York
University School of Law. Mr. Leibowitz currently serves on the board of
directors of Grubb & Ellis Company and Pacific Greystone Corporation.
John D. Santoleri, Director since 1993. Mr. Santoleri is a Managing Director of
Warburg, Pincus. He joined Warburg, Pincus in June 1989. From June 1985 to June
1989, he was associated with The Harlan Company, a New York-based real estate
consulting firm, and served there as Vice President from September 1988 to June
1989. Mr. Santoleri graduated from the Wharton School of the University of
Pennsylvania. He currently serves on the board of directors of Grubb & Ellis
Company and Pacific Greystone Corporation.
Leslie T. Chao, Executive Vice President and Chief Financial Officer since 1993.
Mr. Chao joined Chelsea in 1987 as Chief Financial Officer. As Executive Vice
President and Chief Financial Officer of the Company, he oversees all aspects of
project and corporate finance and supervises the administrative, investor
relations, human resources and accounting functions of the Company. Prior to
joining Chelsea, he was a Vice President in the corporate finance/treasury area
of Manufacturers Hanover Corporation (now The Chase Manhattan Corporation), a
New York bank holding company. Mr. Chao graduated from Dartmouth College and
received an MBA from Columbia Business School.
Thomas J. Davis, Executive Vice President-Asset Management since January 1996.
As Executive Vice President-Asset Management, Mr. Davis oversees the asset
management activities of the Company including leasing, operations and
marketing. From 1988 to 1995, he held various senior positions at Phillips-Van
Heusen Corporation, most recently as Vice President-Real Estate. Mr. Davis has
eighteen years of factory outlet industry experience and has served the industry
in various trade association positions including Chairman of Manufacturers Idea
Exchange as well as a board member of the Steering Committee for FOMA (Factory
Outlet Marketing Association). Mr. Davis received the 1995 Value Retail News
Award of Excellence for individual achievement in the outlet industry.
Bruce Zalaznick, Executive Vice President-Real Estate since 1996. Mr. Zalaznick
joined the Company in 1994 as Vice President-Acquisitions responsible for the
Company's site acquisition activities. In August 1996, Mr. Zalaznick was named
Executive Vice President-Real Estate and is responsible for site acquisitions,
development, design and construction activities of the Company. From 1990 to
1994, he was Senior Vice President-Site Acquisition at Prime Retail, Inc., a
publicly traded REIT specializing in the development of upscale manufacturers'
outlet centers, and in that capacity was responsible for the acquisition and
entitlement of approximately three million square feet of outlet space in ten
states. Mr. Zalaznick graduated from Cornell University and received an MBA from
the Wharton School at the University of Pennsylvania.
Michael J. Clarke, Vice President-Finance since 1994. Mr. Clarke joined the
Company in 1994 and is responsible for the Company's accounting, management
information systems and treasury functions. From 1985 to 1993, he held various
senior positions at Prime Hospitality Corp., a NYSE-listed operator of hotels,
most recently as Executive Vice President & Chief Financial Officer. From 1975
to 1985, he was Senior Audit Manager with J.H. Cohn & Company, a large regional
public accounting firm based in New Jersey. Mr. Clarke is a certified public
accountant and graduated from Seton Hall University.
Denise M. Elmer, Vice President, General Counsel and Secretary since 1993. Ms.
Elmer joined Chelsea as General Counsel in 1993. As Vice President, General
Counsel and Secretary, she oversees the legal activities of the Company,
including those related to property acquisition and development, leasing,
finance and operations. From 1988 to 1993, she was a lawyer in the New York law
firm of Stadtmauer Bailkin Levine & Masur, where she specialized in commercial
real estate law and became a partner in 1990. Ms. Elmer graduated from St.
Lawrence University and received a JD from Duke University School of Law.
Eric K. Helstrom, Vice President-Architecture and Construction, since 1996. Mr.
Helstrom joined Chelsea GCA in 1995 as Director-Development and was named Vice
President-Architecture and Construction in 1996. He oversees the design,
engineering and construction activities of the Company. From 1987 to 1995, he
held various positions including Director-Architecture/Construction with
Alexander Haagen Properties, an AMEX-listed REIT that develops and operates
neighborhood, community, power and regional shopping centers. Mr. Helstrom
graduated from California Polytechnic San Luis Obispo and received a Masters in
Real Estate Development from the University of Southern California. Mr. Helstrom
is a licensed architect and general contractor.
John R. Klein, Vice President-Acquisitions and Development, since 1996. Mr.
Klein joined Chelsea GCA in 1995 as Director-Acquisitions and was named Vice
President-Acquisitions and Development in 1996. He oversees the Company's
acquisitions and development activities including site selection and
entitlements. From 1991 to 1995, he held various positions at Prime Retail,
Inc., most recently as Vice President-Site Acquisition. At Prime, Mr. Klein was
involved in the acquisition and entitlement of over two million square feet of
manufacturers' outlet space in nine states. Mr. Klein graduated from Columbia
University and received an MBA from George Washington University School of
Business.
Gregory C. Link, Vice President-Operations since 1996. Mr. Link joined the
Company in 1994 as Vice President-Leasing responsible for the management of the
Company's leasing activities. In January 1996, Mr. Link was appointed Vice
President-Operations and is responsible for supervising property management
activities at the Company's existing properties. From 1987 to 1994, he was
Chairman, President and Chief Executive Officer of The Ribbon Outlet, Inc., an
affiliate of the world's largest ribbon manufacturer, and in that capacity
opened over 100 factory outlet stores across the United States. From 1971 to
1987 he held various senior merchandising positions with Phillips-Van Heusen
Corporation, Westpoint Pepperell Corporation, May Department Stores and
Associated Dry Goods Corporation. Mr. Link graduated from the College of
Business and Public Administration of the University of Arizona at Tucson.
Michele Rothstein, Vice President-Marketing since 1993. Ms. Rothstein joined
Chelsea in 1989 as Vice President-Marketing. As Vice President-Marketing of the
Company, she oversees all aspects of the Company's marketing and promotion
activities. From 1987 to 1989, she was a product manager at Regina Company and,
prior to 1987, was with Waring & LaRosa Advertising in New York. Ms. Rothstein
graduated from the School of Business at the State University of New York at
Albany.
Catherine A. Lassi, Treasurer since 1997. Ms. Lassi joined Chelsea in 1987,
became Controller in 1990 and Treasurer in January 1997. As Treasurer, she
oversees budgeting, forecasting, contract administration, cash management,
banking and information management activities for the Company. Ms. Lassi is a
certified public accountant and graduated from the University of South Florida.
Sharon M. Vuskalns, Controller since 1997. Ms. Vuskalns joined Chelsea in 1995
as Director of Accounting Services. As Controller, she oversees the accounting
and financial reporting activities for the Company. Prior to joining Chelsea,
she was a Senior Audit Manager with Ernst & Young, LLP. Ms. Vuskalns is a
certified public accountant and graduated from Indiana University.
David C. Bloom and William D. Bloom are brothers.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY MATTERS
The common stock of the Company is traded on the New York Stock Exchange under
the ticker symbol CCG. As of DATE, 1997 there were 391 shareholders of record.
The Company believes it has more than 4,000 beneficial holders of common stock.
The following table sets forth the quarterly high and low closing sales price
per share (as derived from the WALL STREET JOURNAL) and the cash distributions
declared in 1996 and 1995:
SALES PRICE ($) DISTRIBUTIONS
QUARTER ENDED HIGH LOW ($)
December 31, 1996 34-5/8 29-7/8 0.63
September 30, 1996 31-7/8 28-1/2 0.575
June 30, 1996 31-3/4 28-1/4 0.575
March 31, 1996 30-3/8 28-1/2 0.575
December 31, 1995 30-1/8 26-3/4 0.575
September 30, 1995 30-3/8 26-1/2 0.52
June 30, 1995 28-1/4 23-1/4 0.52
March 31, 1995 27-3/8 25-1/8 0.52
While the Company intends to continue paying regular quarterly dividends, future
dividend declarations will be at the discretion of the Board of Directors and
will depend on: the actual cash flow and financial condition of the Company;
capital requirements; annual distribution requirements under the REIT provisions
of the Internal Revenue Code; covenant limitations under the Unsecured Facility,
the Term Notes and the Reset Notes; and such other factors as the Board of
Directors deems relevant.
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
CHELSEA GCA REALTY, INC. AND PREDECESSOR BUSINESS (1)
(IN THOUSANDS EXCEPT PER SHARE, AND CENTER DATA)
Period Period
Nov. Jan. Year
Year Ended 2, 1, Ended
December 31, 1993 1993 Dec.
to to 31,
Dec. 31, Nov.1,
1996 1995 1994 1993 1993 1992
---- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Rental income............................... $63,792 $51,361 $38,010 $6,401 $21,398 $23,419
Total revenues.............................. 91,356 72,515 53,145 8,908 29,844 32,763
Total expenses.............................. 59,996 41,814 28,179 4,618 28,372 29,923
Income before minority interest............. 31,360 29,650 24,966 4,290 1,472 2,840
Minority interest........................... (9,899) (10,078) (8,538) (1,470) (1,128) (1,640)
Income before extraordinary item............ 21,461 19,572 16,428 2,820 344 1,200
Extraordinary item - loss on
retirement of debt........................ (607) - - (6,185) - -
Net income (loss)........................... 20,854 19,572 16,428 (3,365) 344 1,200
Income per share before extraordinary item.. $1.78 $1.72 $1.50 $0.26 - -
Net income (loss) per share................. $1.73 $1.72 $1.50 $(0.31) - -
OWNERSHIP INTEREST:
REIT common shares.......................... 12,062 11,359 10,956 10,937 - -
Operating Partnership units................. 5,316 5,601 5,690 5,703 - -
Weighted average shares/units outstanding... 17,378 16,960 16,646 16,640 - -
BALANCE SHEET DATA:
Rental properties before accumulated
depreciation............................ $512,354 $415,983 $332,834 $243,218 $192,565 $158,473
Total assets................................ 502,212 408,053 330,775 288,732 188,895 152,926
Total liabilities ......................... 240,878 141,577 68,084 24,496 173,012 146,860
Minority interest........................... 75,994 89,718 91,640 90,564 5,587 4,121
Stockholders'/owners' equity................ $185,340 $176,758 $171,051 $173,672 $10,296 $1,945
Distributions declared per common share..... $2.355 $2.135 $1.90 $0.30 - -
OTHER DATA:
Funds from operations (2)................... $48,616 $41,870 $33,631 $5,648 $7,727 $8,880
Cash flows from:
Operating activities..................... $52,898 $36,330 $32,522 $4,746 $9,893 $9,030
Investing activities..................... (98,956) (81,926) (79,595) (63,607) (29,032) (13,661)
Financing activities..................... $55,957 $40,474 $(1,707) $116,570 $22,692 $ 6,341
GLA at end of period........................ 3,610 2,934 2,342 1,879 1,620 1,444
Weighted average GLA (3).................... 3,255 2,680 2,001 1,743 1,550 1,401
Centers at end of the period................ 18 16 16 13 12 12
New centers opened.......................... 2 1 3 1 - 2
Centers expanded............................ 5 7 4 3 2 1
Centers sold................................ - 1 - - - -
</TABLE>
<PAGE>
NOTES TO SELECTED FINANCIAL DATA:
(1) The selected financial data includes the combined financial statements of
Chelsea GCA Properties ("Predecessor Business") for the periods prior to
November 2, 1993, and the consolidated financial statements of Chelsea GCA
Realty, Inc. for the periods after November 1, 1993.
(2) Management considers funds from operations ("FFO") an
appropriate measure of performance for an equity real estate investment
trust. FFO, as defined by the National Association of Real Estate
Investment Trusts ("NAREIT"), is net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, exclusive of outparcel sales,
plus depreciation and amortization (as defined by NAREIT), and after
adjustments for unconsolidated partnerships and joint ventures. Adjustments
for unconsolidated partnerships and joint ventures are calculated to
reflect FFO on the same basis. FFO does not represent net income or cash
flow from operations as defined by generally accepted accounting principles
and should not be considered an alternative to net income as an indicator
of operating performance or to cash from operations, and is not necessarily
indicative of cash flow available to fund cash needs.
(3) GLA weighted by months in operation.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in connection with the financial
statements included and notes thereto appearing elsewhere in this annual report.
Certain comparisons between periods have been made on a percentage or weighted
average per square foot basis. The latter technique adjusts for square footage
changes at different times during the year.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 121 (Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of) and SFAS No. 123
(Accounting for Stock-Based Compensation) which are effective for fiscal years
beginning after December 15, 1995. The Company adopted SFAS No. 121 in the first
quarter of 1996 and provided the required footnote disclosure under SFAS No. 123
in the financial statements. Adoption of SFAS No. 121 or 123 has no material
impact on the Company's financial position or results of operations.
GENERAL OVERVIEW
At December 31, 1996, the Company operated 18 manufacturers' outlet centers,
compared to 16 at the end of 1995 and 1994. The Company's operating gross
leasable area ("GLA") at December 31, 1996 was 3.6 million square feet compared
to 2.9 million square feet and 2.3 million square feet at December 31, 1995 and
1994, respectively.
From January 1, 1994 to December 31, 1996, the Company grew by increasing rents
at its operating centers, opening six new centers and expanding ten centers. The
1.7 million square feet ("sf") of GLA added is detailed in the schedule that
follows:
<PAGE>
<TABLE>
<CAPTION>
SINCE
JANUARY 1,
1994 1996 1995 1994
------------ --------------- ------------- ----------------
Changes in GLA (sf in 000's):
<S> <C> <C> <C> <C>
NEW CENTERS OPENED:
Camarillo Premium Outlets 149 - 149 -
Petaluma Village....................... 150 - - 150
Napa Premium Outlets................... 72 - - 72
Solvang Designer Outlets 52 - - 52
North Georgia.......................... 292 292 - -
Clinton Crossing....................... 272 272 - -
------------- ---------------- -------------- -------------
TOTAL NEW CENTERS......................... 987 564 149 274
CENTERS EXPANDED:
Desert Hills............................... 191 - 191 -
Aurora Premium Outlets..................... 157 - 27 130
Woodbury Common............................ 25 2 19 4
Napa Premium Outlets....................... 99 - 99 -
Camarillo Premium Outlets.................. 131 54 77 -
Columbia Gorge............................. 46 - - 46
Patriot Plaza.............................. 35 - 35 -
Petaluma Village........................... 46 30 16 -
Folsom Premium Outlets..................... 22 22 - -
Liberty Village............................ 4 4 - -
Other...................................... 2 - (7) 9
---------------- ---------------- ---------------- ----------------
TOTAL CENTERS EXPANDED................... 758 112 457 189
CENTERS SOLD:
Page Factory Stores........................ (14) - (14) -
---------------- ---------------- ---------------- ----------------
GLA ADDED DURING THE PERIOD.............. 1,731 676 592 463
OTHER DATA:
GLA at end of period................... 3,610 2,934 2,342
Weighted average GLA (1)............... 3,255 2,680 2,001
Centers at end of period............... 18 16 16
New centers opened..................... 2 1 3
Centers expanded....................... 5 7 4
Centers sold........................... - 1 -
NOTE: (1) Average GLA weighted by months in operation
</TABLE>
The Company's centers produced weighted average reported tenant sales of
approximately $345 per square foot in 1996 compared to $313 and $309 per square
foot in 1995 and 1994, respectively.
Two of the Company's centers, Woodbury Common and Desert Hills, provided
approximately 38%, 40% and 45% of the Company's total revenue for the years
1996, 1995, and 1994, respectively. In addition, approximately 44%, 45%, and 32%
of the Company's revenues for the years ended December 31, 1996, 1995 and 1994,
respectively, were derived from the Company's centers in California.
The Company does not consider any of its lessees to be anchor tenants and no
individual tenant accounts for more than 10% of the Company's gross revenues or
total GLA. Only one tenant, combining all of its store concepts, occupies in
excess of 2.7% of the Company's total GLA. In view of these statistics and the
Company's past success in re-leasing available space, the Company believes the
loss of any individual tenant would not have a significant effect on future
operations.
The discussion below is based upon operating income before minority interest
and extraordinary item. The minority interest in net income varies from period
to period as a result of changes in Operating Partnership interests and the
Company's 50% investment in Solvang.
Comparison of year ended December 31, 1996 to year ended December 31, 1995
Operating income before interest, depreciation and amortization increased $12.4
million, or 26.8%, to $59.1 million in 1996 from $46.7 million in 1995. This
increase was primarily the result of the Company's expansions and new center
openings.
Base rentals increased $10.4 million, or 22.5%, to $56.4 million in 1996 from
$46.0 million in 1995 due to expansions, new center openings and higher average
rents. Base rental revenue per weighted average square foot increased to $17.32
in 1996 from $17.17 in 1995 as a result of higher rental rates on new leases and
renewals.
Percentage rents increased $2.1 million, or 38.7%, to $7.4 million in 1996 from
$5.3 million in 1995. The increase was primarily due to increases in tenant
sales, new center openings and expansions at the Company's larger centers.
Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $5.1 million, or 25.6%, to $24.8 million in 1996
from $19.7 million in 1995, due to the recovery of operating and maintenance
costs at new and expanded centers. On a weighted average square foot basis,
expense reimbursements increased 3.5% to $7.61 in 1996 from $7.35 in 1995. The
average recovery of reimbursable expenses was 91.8% in 1996 compared to 93.9% in
1995.
Other income increased $1.3 million to $2.8 million in 1996 from $1.5 million in
1995 primarily as a result of an outparcel sale at one of the operating
centers, increased interest income and lease termination settlements.
Interest, in excess of amounts capitalized, increased $5.7 million to $8.8
million in 1996 from $3.1 million in 1995, due to higher debt balances from the
issuance of $200 million of public debt during 1996 and lower construction in
progress.
Operating and maintenance expenses increased $6.0 million, or 28.6%, to $27.0
million in 1996 from $21.0 million in 1995. The increase was primarily due to
costs related to expansions and new centers. On a weighted average square foot
basis, operating and maintenance expenses increased 5.9% to $8.29 in 1996 from
$7.83 in 1995 as a result of increased insurance expense and additional
maintenance and security services provided at the centers.
General and administrative expenses increased $0.3 million to $3.3 million in
1996 from $3.0 million in 1995. On a weighted average square foot basis, general
and administrative expenses decreased 7.2% to $1.03 in 1996 from $1.11 in 1995.
Increased personnel and overhead costs were offset by additions to operating
GLA.
Other expenses remained stable at $1.9 million in 1996 and 1995.
Comparison of year ended December 31, 1995 to year ended December 31, 1994
Operating income before interest, depreciation and amortization increased $11.8
million, or 33.7%, to $46.7 million in 1995 from $34.9 million in 1994. This
increase was primarily the result of the Company's expansions and new center
openings.
Base rentals increased $11.6 million, or 33.7%, to $46.0 million in 1995 from
$34.4 million in 1994 due to expansions and new center openings. Base rental
revenue per weighted average square foot remained stable at $17.17 in 1995
compared to $17.20 in 1994.
Percentage rents increased $1.7 million, or 48.4%, to $5.3 million in 1995 from
$3.6 million in 1994. The increase was primarily due to increases in tenant
sales and expansions at the Company's larger centers.
Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $6.1 million, or 45.1%, to $19.7 million in 1995
from $13.6 million in 1994, due to the recovery of operating and maintenance
costs at new and expanded centers. On a weighted average square foot basis,
expense reimbursements increased 8.3% to $7.35 in 1995 from $6.79 in 1994. The
average recovery of reimbursable expenses was 93.9% in 1995 compared to 94.7% in
1994.
Other income decreased $0.1 million to $1.5 million in 1995 from $1.6 million in
1994 primarily as a result of declining interest income from investment of IPO
proceeds.
Interest, in excess of amounts capitalized, increased $2.1 million to $3.1
million in 1995 from $1.0 million in 1994, due to higher borrowings under the
Credit Facility.
Operating and maintenance expenses increased $6.7 million, or 46.4%, to $21.0
million in 1995 from $14.3 million in 1994. The increase was primarily due to
costs related to expansions and new centers. On a weighted average square foot
basis, operating and maintenance expenses increased 9.4% to $7.83 in 1995 from
$7.16 in 1994 as a result of increased real estate taxes and additional
maintenance services.
General and administrative expenses increased $0.4 million to $3.0 million in
1995 from $2.6 million in 1994. On a weighted average square foot basis, general
and administrative expenses decreased 13.3% to $1.11 in 1995 from $1.28 in 1994.
Increased personnel and overhead costs were offset by additions to operating
GLA.
Other expenses increased $0.6 million to $1.9 million in 1995 from $1.3 million
in 1994. The increase included additional reserves for bad debts, legal fees,
and tenant improvement write-offs.
In December 1995, the Company sold its smallest property to an unrelated third
party at a book loss of $1.1 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes it has adequate financial resources to fund operating
expenses, distributions, and planned development and construction activities.
Operating cash flow in 1996 of $52.9 million is expected to increase with a full
year of operations of the 676,000 square feet of GLA added during 1996 and
scheduled openings of approximately 600,000 to 700,000 square feet of expansions
and a new center in 1997, subject to market demand. In addition, at December 31,
1996 the Company had $100 million available under its Unsecured Facility, access
to the public markets through its $200 million equity shelf registration, and
cash and cash equivalents of $13.9 million.
Operating cash flow is expected to provide sufficient funds for distributions in
accordance with REIT federal income tax requirements. In addition, the Company
anticipates retaining sufficient operating cash to fund re-tenanting and lease
renewal tenant improvement costs, as well as capital expenditures to maintain
the quality of its centers.
In the fourth quarter of 1996, the Company raised its quarterly distribution to
$0.63 per share from $0.575 per share, a 9.6% increase. Distributions declared
and recorded in 1996 were $40.4 million or $2.355 per share or unit. The
Company's 1996 distribution payout ratio as a percentage of net income before
depreciation and amortization, loss on sale of property and minority interest
was 83.0%. Distributions are limited by covenants of the Unsecured Facility to
95% of net income before depreciation and amortization and minority interest.
In January 1996, the Company's Operating Partnership completed a $100 million
public debt offering of 7.75% unsecured term notes due January 2001 (the "Term
Notes"), which are guaranteed by the Company. The five-year non-callable Term
Notes were priced at a discount of 99.952 to yield 7.85% to investors. Net
proceeds from the offering were used to pay down substantially all of the
borrowings under the Secured Facility.
In March 1996, the Company replaced its secured revolving credit facility (the
"Secured Facility") with a new unsecured $100 million revolving credit facility
(the "Unsecured Facility") which expires March 29, 1998. Interest on the
outstanding balance is payable monthly at a rate equal to the London Interbank
Offered Rate ("LIBOR") plus 1.75%, or the prime rate, at the Company's option.
In January 1997, the interest rate on the line was reduced to LIBOR plus 1.45%.
A fee on the unused portion of the Unsecured Facility is payable quarterly at a
rate of 0.25% per annum. The Unsecured Facility was completely unused at
December 31, 1996.
In October 1996, the Company's Operating Partnership completed a $100 million
offering of Remarketed Floating Rate Reset Notes (the "Reset Notes"), which are
guaranteed by the Company. The interest rate will reset quarterly and will equal
LIBOR plus 75 basis points during the first year. The spread and the spread
period for subsequent periods will be adjusted in whole or part at the end of
the first year, pursuant to an agreement with the underwriters. Unless
previously redeemed, the Reset Notes will have a final maturity of October 23,
2001. Net proceeds from the offering were used to repay all of the borrowings
under the Unsecured Facility and for working capital.
The Company is in the process of planning development for 1997 and beyond. At
December 31, 1996, approximately 380,000 square feet of the Company's planned
1997 development was under construction. The Company anticipates 1997
development and construction costs of $90 million to $100 million. Funding is
currently expected from borrowings under the Unsecured Facility, additional debt
offerings, and/or equity offerings.
To achieve planned growth and favorable returns in both the short and long-term,
the Company's financing strategy is to maintain a strong, flexible financial
position by: (i) maintaining a conservative level of leverage; (ii) extending
and sequencing debt maturity dates; (iii) managing exposure to floating interest
rates; and (iv) maintaining liquidity. Management believes these strategies will
enable the Company to access a broad array of capital sources, including bank or
institutional borrowings and secured and unsecured debt and equity offerings.
It is the Company's policy to limit its borrowings to less than 40% of total
market capitalization (defined as the value of outstanding shares of common
stock on a fully diluted basis including conversion of partnership units to
common stock, plus total debt). Applying a December 31, 1996 closing price of
$34.625 per common share, the Company's ratio of debt to total market
capitalization was approximately 25% at December 31, 1996.
Net cash provided by operating activities was $52.9 million and $36.3 million
for the years ended December 31, 1996 and 1995, respectively. The increase was
primarily due to the growth of the Company's GLA to 3.6 million square feet in
1996 from 2.9 million square feet in 1995 and increases in accrued interest on
the borrowings. Net cash used in investing activities increased $17.0 million
for the year ended December 31, 1996 compared to 1995, primarily as a result of
increased construction activity. Net cash provided by financing activities
increased $15.5 million primarily due to debt offerings offset by repayments of
the Unsecured and Secured Facility.
Net cash provided by operating activities was $36.3 million and $32.5 million
for the years ended December 31, 1995 and 1994, respectively. The increase was
primarily due to the growth of the Company's GLA to 2.9 million square feet in
1995 from 2.3 million square feet in 1994. Net cash used in investing activities
increased $2.3 million for the year ended December 31, 1995 compared to 1994,
primarily as a result of increased construction activity. Net cash provided by
financing activities increased $42.2 million primarily due to increased
borrowings for development and construction activity during 1995.
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") should be considered in
conjunction with net income, as presented in the statements of operations
included elsewhere herein, to facilitate a clear understanding of the operating
results of the Company. Management considers FFO an appropriate measure of
performance for an equity real estate investment trust. FFO, as defined by the
National Association of Real Estate Investment Trusts ("NAREIT"), is net income
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property,
exclusive of outparcel sales, plus depreciation and amortization (as defined by
NAREIT), and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures are
calculated to reflect FFO on the same basis. FFO does not represent net income
or cash flow from operations as defined by generally accepted accounting
principles and should not be considered an alternative to net income as an
indicator of operating performance or to cash from operations, and is not
necessarily indicative of cash flow available to fund cash needs.
In March 1995, NAREIT issued a clarification of its definition of FFO. For
illustrative purposes, the following table presents the Company's FFO under both
methods of calculation for the years 1996 and 1995:
<TABLE>
<CAPTION>
Current Method Old Method
Year Ended Year Ended
December 31, December 31,
1996 1995 1996 1995
------------ ------------- ------------ ---------
<S> <C> <C> <C> <C>
Net income before extraordinary item............. $21,461 $19,572 $21,461 $19,572
Add:
Depreciation and amortization (1).............. 18,747 12,645 18,747 12,645
Amortization of deferred financing costs and
depreciation of non-rental real estate assets (1,234) (1,191) - -
Loss on sale of property....................... - 1,051 - 1,051
Minority interest (1).......................... 9,642 9,793 9,642 9,793
------------ ------------- ------------ --------
FFO ............................................. $48,616 $41,870 $49,850 $43,061
============ ============= ============ ========
Average shares/units outstanding................. 17,378 16,960 17,378 16,960
Dividends declared per share..................... $2.355 $2.135 $2.355 $2.135
NOTE: (1) Excludes depreciation of $218 and $178 and minority
interest of $257 and $285 for the years ended December 31,
1996 and 1995, respectively, attributed to the 50% limited
partner in Solvang
</TABLE>
<PAGE>
ECONOMIC CONDITIONS
Substantially all leases contain provisions, including escalations of base rents
and percentage rentals calculated on gross sales, to mitigate the impact of
inflation. Inflationary increases in common area maintenance and real estate tax
expenses are substantially all reimbursed by tenants.
Virtually all tenants have met their lease obligations and the Company continues
to attract and retain quality tenants. The Company intends to reduce operating
and leasing risks by continually improving its tenant mix, rental rates and
lease terms, and by pursuing contracts with creditworthy upscale and national
brand-name tenants.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial information of the Company for the years
ended December 31, 1996, 1995 and 1994 and the Reports of the Independent
Auditors thereon are included elsewhere herein. Reference is made to the
financial statements and schedules in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10, 11, 12 AND 13.
The required information in the following items will appear in the Company's
Proxy Statement furnished to shareholders in connection with the 1997 Annual
Meeting, and is incorporated by reference in this Form 10-K Annual Report.
Item 10. Directors and Executive Officers of the Registrant*
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
* Certain information regarding Directors and Officers is included at the end of
Part I.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 and 2. The response to this portion of Item 14 is submitted as a separate
section of this report.
3. Exhibits
3.1 Articles of Incorporation of the Company, as amended.
Incorporated by reference to Exhibit 3.1 to Form 10Q for the
quarterly period ended June 30, 1996.
3.2 By-laws of the Company. Incorporated by reference to
Exhibit 3.2 to Registration Statement filed by the
Company on Form S-11 under the Securities Act of 1933
(file No. 33-67870) (S-11).
3.3 Agreement of Limited Partnership for the Operating
Partnership. Incorporated by reference to Exhibit
3.3 to S-11.
4.1 Form of Indenture among the Company, Chelsea GCA Realty
Partnership, L.P., and State Street Bank and Trust Company, as
Trustee. Incorporated by reference to Exhibit 4.4 to
Registration Statement filed by the Company on Form S-3 under
the Securities Act of 1933 (File No. 33-98136).
10.1 Registration Rights Agreement among the Company and
recipients of Units. Incorporated by reference to
Exhibit 4.1 to S-11.
10.2 Amended and Restated Credit Agreement dated January 27, 1997
among Chelsea GCA Realty Partnership, L.P., Chelsea GCA
Realty, Inc., The First National Bank of Boston, individually
and as an agent, and other Lending Institutions listed
therein.
10.3 Employment Agreement dated December 15, 1995 by
and between the Company and Thomas J. Davis.
Incorporated by reference to Exhibit 10.5 to Form 10K
for the year ended December 31, 1995.
10.4 Agreement dated August 25, 1995, among Chelsea
GCA Realty, Inc., Chelsea GCA Realty Partnership,
L.P. and Steven L. Craig. Incorporated by reference
to Exhibit 10.6 to Form 10K for the year ended
December 31, 1995.
23.1 Consent of Ernst & Young LLP.
(b) Reports on Form 8-K filed during the period covered by this report.
None
(c) Exhibits
None
(d) Financial Statement Schedules - The response to this portion of Item 14
is submitted as a separate schedule of this report.
<PAGE>
ITEM 8, ITEM 14(A)(1) AND (2) AND ITEM 14(D)
(A)1. FINANCIAL STATEMENTS
FORM 10-K
REPORT PAGE
CONSOLIDATED FINANCIAL STATEMENTS-CHELSEA GCA REALTY, INC.
Report of Independent Auditors.................................... F-1
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-2
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994............................... F-3
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1996, 1995 and 1994........................... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.................................. F-5
Notes to Consolidated Financial Statements........................ F-6
(A)2 AND (D) FINANCIAL STATEMENT SCHEDULE
Schedule III-Consolidated Real Estate and Accumulated
Depreciation...................................................... F-15
and F-16
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements and notes thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS
CHELSEA GCA REALTY, INC.
We have audited the accompanying consolidated balance sheets of Chelsea GCA
Realty, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. Our audits also included the
financial statement schedule listed in the Index as Item 14(a). These financial
statements and schedule are the responsibility of the management of Chelsea GCA
Realty, Inc. Our responsibility is to express an opinion on the financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Chelsea GCA
Realty, Inc. as of December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
NEW YORK, NEW YORK
FEBRUARY 12, 1997
<PAGE>
<TABLE>
<CAPTION>
CHELSEA GCA REALTY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31,
1996 1995
----------- -----------
<S> <C> <C>
Assets
Rental properties:
Land.................................................................. $ 80,312 $ 75,224
Depreciable property.................................................. 432,042 340,759
----------- -----------
Total rental property...................................................... 512,354 415,983
Accumulated depreciation................................................... (58,054) (41,373)
----------- -----------
Rental properties, net..................................................... 454,300 374,610
Cash and equivalents....................................................... 13,886 3,987
Notes receivable-related parties........................................... 8,023 8,129
Deferred costs, net........................................................ 10,321 7,731
Other assets............................................................... 15,682 13,596
----------- -----------
Total assets............................................................... $ 502,212 408,053
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bank debt............................................................. $ - $ 96,000
7.75% Unsecured Notes due 2001 99,668 -
Remarketed Floating Rate Reset Notes due 2001......................... 100,000 -
Construction payables................................................. 14,473 18,617
Accounts payable and accrued expenses................................. 12,257 5,730
Obligation under capital lease........................................ 9,805 9,845
Distribution payable to stockholders.................................. - 6,604
Distribution payable to unitholders................................... 3,038 3,186
Rent payable.......................................................... 1,637 1,595
----------- ----------
Total liabilities.......................................................... 240,878 141,577
Commitments and contingencies
Minority interest.......................................................... 75,994 89,718
Stockholders' equity:
Preferred stock, $0.01 par value,
authorized 5,000 shares, none issued
Common stock, $0.01 par value, authorized 50,000 shares,
issued and outstanding 12,402 in 1996 and 11,485 in 1995............. 124 115
Paid-in-capital....................................................... 207,910 192,069
Distributions in excess of net income................................. (22,694) (15,426)
----------- -----------
Total stockholders' equity................................................. 185,340 176,758
----------- -----------
Total liabilities and stockholders' equity................................. $ 502,212 $408,053
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHELSEA GCA REALTY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES:
Base rental.................................... $56,390 $46,025 $34,415
Percentage rentals............................. 7,402 5,336 3,595
Expense reimbursements......................... 24,758 19,704 13,584
Other income................................... 2,806 1,450 1,551
-------------- -------------- --------------
Total revenues...................................... 91,356 72,515 53,145
EXPENSES:
Interest....................................... 8,818 3,129 982
Operating and maintenance...................... 26,979 20,984 14,337
Depreciation and amortization.................. 18,965 12,823 8,982
General and administrative..................... 3,342 2,967 2,561
Other.......................................... 1,892 1,911 1,317
-------------- -------------- --------------
Total expenses...................................... 59,996 41,814 28,179
Operating income.................................... 31,360 30,701 24,966
Loss on sale of center.............................. - (1,051) -
-------------- -------------- -----------
Income before minority interest and extraordinary item 31,360 29,650 24,966
Minority interest................................... (9,899) (10,078) (8,538)
-------------- -------------- --------------
Income before extraordinary item.................... 21,461 19,572 16,428
Extraordinary item-loss on early
extinguishment of debt, net of minority
interest in the amount of $295................ (607) - -
-------------- -------------- --------------
NET INCOME.......................................... $20,854 $19,572 $16,428
============== ============== ==============
Income per share before
extraordinary item.......... $1.78 $1.72 $1.50
Extraordinary item per
share............................................... (0.05) - -
-------------- -------------- --------------
Net income per share................................ $1.73 $1.72 $1.50
============== ============== ==============
Weighted average common
shares outstanding.................................. 12,062 11,359 10,956
============== ============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHELSEA GCA REALTY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Common Additional Distributions Total
Stock at Paid-in- in Excess of Stockholders'
Par Value Capital Net Income Equity
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance December 31, 1993........................ $109 $180,209 ($6,646) $173,672
Net income....................................... - - 16,428 16,428
Cash distributions declared ($1.90 per share of
which $0.30 represented a return of capital
for federal income tax purposes)............ - (20,840) (20,840)
Shares issued in exchange for units of the
Operating Partnership ....................... 2 1,789 - 1,791
-------------- --------------- --------------- ---------------
Balance December 31, 1994........................ 111 181,998 (11,058) 171,051
Net income....................................... - - 19,572 19,572
Cash distributions declared ($2.135 per share of
which $0.406 represented a return of capital for
federal income tax purposes................... - - (23,940) (23,940)
Shares issued in exchange for units of the
Operating Partnership......................... 1 1,628 - 1,629
Shares issued through dividend
reinvestment program........................ 3 8,443 - 8,446
-------------- --------------- --------------- ---------------
BALANCE DECEMBER 31, 1995........................ 115 192,069 (15,426) 176,758
NET INCOME....................................... - - 20,854 20,854
CASH DISTRIBUTIONS DECLARED ($2.355 PER SHARE OF
WHICH $0.33 REPRESENTED A RETURN OF
CAPITAL FOR FEDERAL INCOME TAX PURPOSES..... - - (28,122) (28,122)
Exercise of stock options........................ 1 2,583 - 2,584
Shares issued in exchange for units of the
Operating Partnership......................... 8 12,626 - 12,634
Shares issued through dividend
reinvestment program........................ - 632 - 632
-------------- --------------- --------------- ---------------
Balance December 31, 1996........................ $124 $207,910 ($22,694) $185,340
============== =============== =============== ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHELSEA GCA REALTY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year ended December 31,
1996 1995 1994
-------------- ------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income............................................. $20,854 $19,572 $16,428
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 18,965 12,823 8,982
Minority interest in net income 9,604 10,078 8,538
Loss on sale of center............................ - 1,051 -
Loss on early extinguishment of debt.............. 902 - -
Additions to deferred lease costs................. (2,537) (1,245) (823)
Other operating activities........................ 191 146 -
Changes in assets and liabilities:
Straight-line rent receivable.................... (1,595) (1,357) (1,205)
Other assets..................................... (15) (2,893) (677)
Accounts payable and accrued expenses............ 6,529 (1,845) 1,279
-------------- -------------- --------------
Net cash provided by operating activities............. 52,898 36,330 32,522
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to rental properties......................... (97,585) (80,249) (76,071)
Additions to deferred development costs................ (1,477) (2,068) (755)
Advances to related parties............................ (67) (189) (2,769)
Payments from related parties.......................... 173 115 -
Proceeds from sale of center........................... - 465 -
-------------- -------------- --------------
Net cash used in investing activities.................. (98,956) (81,926) (79,595)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of common stock................. 2,583 8,446 -
Contributions.......................................... - - 2,429
Distributions.......................................... (47,124) (34,748) (27,957)
Debt proceeds ......................................... 292,592 68,000 28,000
Repayments of debt..................................... (189,000) - -
Additions to deferred financing costs.................. (3,660) (866) (4,179)
Other financing activities............................. 566 (358) -
-------------- -------------- --------------
Net cash provided by (used in) financing activites..... 55,957 40,474 (1,707)
Net increase (decrease) in cash and equivalents....... 9,899 (5,122) (48,780)
Cash and equivalents, beginning of period............. 3,987 9,109 57,889
-------------- -------------- --------------
Cash and equivalents, end of period................... $13,886 $3,987 $9,109
============== ============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Chelsea GCA Realty, Inc. (the "Company") is engaged in the development,
ownership, acquisition and operation of manufacturers' outlet centers. As of
December 31, 1996 the Company operated 18 manufacturers' outlet centers in 10
states. The Company is a self-administered and self-managed real estate
investment trust ("REIT"). The Company is a general partner in Chelsea GCA
Realty Partnership, L.P. (the "Operating Partnership").
BASIS OF PRESENTATION
All of the Company's assets are held by, and all of its operations conducted
through, the Operating Partnership. Due to the Company's ability, as the sole
general partner, to exercise financial and operational control over the
Operating Partnership, it is consolidated in the accompanying financial
statements. All intercompany transactions have been eliminated in consolidation.
The consolidated financial statements of the Company include the accounts of
Solvang Designer Outlets ("Solvang"), a limited partnership in which the Company
has had a 50% interest since February 24, 1994 (the date of commencement of
development). As sole general partner, the Company has the ability to exercise
financial and operational control over the partnership. Solvang is not material
to the operations or financial position of the Company.
Certain balances in the accompanying prior year financial statements have been
reclassified to conform to the current year presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
RENTAL PROPERTIES
Rental properties are presented at cost net of accumulated depreciation.
Depreciation is computed on the straight-line basis over the estimated useful
lives of the assets. The Company uses 25-40 year estimated lives for buildings,
and 15 and 5-7 year estimated lives for land improvements and equipment,
respectively. Expenditures for ordinary maintenance and repairs are charged to
operations as incurred, while significant renovations and enhancements that
improve and/or extend the useful life of an asset are capitalized and
depreciated over the estimated useful life. During 1996, the Company adopted
Statement of Financial Accounting Standards No. 121 ("SFAS No. 121"), Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of. SFAS No. 121 requires that the Company review real estate assets for
impairment wherever events or changes in circumstances indicate that the
carrying value of assets to be held and used may not be recoverable. Impaired
assets are reported at the lower of cost or fair value. Assets to be disposed of
are reported at the lower of cost or fair value less cost to sell. Prior to the
adoption of SFAS No. 121, real estate assets were stated at the lower of cost or
net realizable value. No impairment losses have been recorded in any of the
periods presented.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
CASH AND EQUIVALENTS
All demand and money market accounts and certificates of deposit with original
terms of three months or less are considered cash equivalents. At December 31,
1996 and 1995 cash equivalents consisted of repurchase agreements which were
held by one financial institution and US Government agency securities which
matured in January of the following year. The carrying amount of such
investments approximated fair value.
DEVELOPMENT COSTS
Development costs, including interest, taxes, insurance and other costs incurred
in developing new properties, are capitalized. Upon completion of construction,
development costs are amortized on a straight-line basis over the useful lives
of the respective assets.
CAPITALIZED INTEREST
Interest, including the amortization of deferred financing costs for borrowings
used to fund development and construction, is capitalized as construction in
progress and allocated to individual property costs.
RENTAL EXPENSE
Rental expense is recognized on a straight-line basis over the initial term of
the lease.
DEFERRED LEASE COSTS
Deferred lease costs consist of fees and direct costs incurred to initiate and
renew operating leases, and are amortized on a straight-line basis over the
initial lease term or renewal period as appropriate.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized as interest costs on a straight-line
basis over the terms of the respective agreements. Unamortized deferred
financing costs are expensed when the associated debt is retired before
maturity.
REVENUE RECOGNITION
Leases with tenants are accounted for as operating leases. Minimum rental income
is recognized on a straight-line basis over the lease term. Due and unpaid rents
are included in other assets in the accompanying balance sheet. Certain lease
agreements contain provisions for rents which are calculated on a percentage of
sales and recorded on the accrual basis. Virtually all lease agreements contain
provisions for reimbursement of real estate taxes, insurance, advertising and
certain common area maintenance costs.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
INCOME TAXES
The Company is taxed as a REIT under Section 856(c) of the Internal Revenue Code
of 1986, as amended, commencing with the tax year ended December 31, 1993. As a
REIT, the Company generally is not subject to federal income tax. To maintain
qualification as a REIT, the Company must distribute at least 95% of its REIT
taxable income to its stockholders and meet certain other requirements. If the
Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax on its taxable income at regular corporate rates.
The Company may also be subject to certain state and local taxes on its income
and property. Under certain circumstances, federal income and excise taxes may
be due on its undistributed taxable income. At December 31, 1996 and 1995, the
Company was in compliance with all REIT requirements and was not subject to
federal income taxes.
NET INCOME PER COMMON SHARE
Net income per common share is computed in accordance with the treasury stock
method and is based on the weighted average number of common shares and common
stock equivalent shares outstanding during the years ended December 31, 1996,
1995 and 1994. The common stock equivalent shares represent options outstanding.
STOCK OPTION PLAN
The Company follows Accounting Principles Board Opinion No. 25 (Accounting for
Stock Issued to Employees) and the related interpretations in accounting for its
employee stock options. In accordance with SFAS No. 123 (Accounting for
Stock-Based Compensation), the Company has provided the required footnote
disclosure for the compensation expense related to the fair value of the
outstanding stock options.
CONCENTRATION OF COMPANY'S REVENUE AND CREDIT RISK
Approximately 38%, 40% and 45% of the Company's revenues for the years ended
December 31, 1996, 1995 and 1994, respectively, were derived from the Company's
two centers with the highest revenues, Woodbury Common and Desert Hills. The
loss of either center or a material decrease in revenues from either center for
any reason may have a material adverse effect on the Company. In addition,
approximately 44%, 45% and 32% of the Company's revenues for the years ended
December 31, 1996, 1995 and 1994, respectively, were derived from the Company's
centers in California.
Management of the Company performs ongoing credit evaluations of its tenants and
requires certain tenants to provide security deposits. Although the Company's
tenants operate principally in the retail industry, there is no dependence upon
any single tenant.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MINORITY INTEREST
Minority interest is comprised of the following:
. The unitholders' interest in the Operating Partnership which was
received in exchange for the assets contributed to the Operating
Partnership on November 2, 1993 and additional units exchanged for
property acquisitions during 1995 and 1996. The unitholders' interest
at December 31, 1996 and 1995 was 27.7% and 32.5%, respectively.
. The joint venture limited partner's 50% partnership interest in Solvang.
3. RENTAL PROPERTIES
The following summarizes the carrying values of rental properties as of December
31 (in thousands):
1996 1995
-------------- -------------
Land and improvements........................... $153,096 $123,658
Buildings and improvements....................... 335,242 264,990
Construction-in-process........................... 18,888 23,861
Equipment and furniture............................ 5,128 3,474
-------------- -------------
Total rental property............................ 512,354 415,983
Accumulated depreciation and amortization........ (58,054) (41,373)
-------------- -------------
Total rental property, net....................... $454,300 $374,610
============== =============
Interest costs capitalized as part of buildings and improvements were $3.9
million, $3.7 million and $0.9 million for the years ended December 31, 1996,
1995 and 1994, respectively.
Commitments for land, new construction, development, and acquisitions totaled
approximately $52.0 million at December 31, 1996.
Depreciation expense (including amortization of the capital lease) amounted to
$16.9 million, $11.2 million and $8.3 million for the years ended December 31,
1996, 1995 and 1994, respectively.
4. DEFERRED COSTS
The following summarizes the carrying amounts for deferred costs as of December
31 (in thousands):
1996 1995
----------- -----------
Lease costs...................................... $8,095 $5,606
Financing costs.................................. 8,329 4,669
Development costs................................ 2,111 2,325
Other............................................ 491 491
----------- -----------
Total deferred costs............................. 19,026 13,091
Accumulated amortization........................ (8,705) (5,360)
----------- -----------
Total deferred costs, net...................... $10,321 $7,731
=========== ===========
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. DEBT
In March 1996, the Company replaced its secured revolving credit facility (the
"Secured Facility") with a new unsecured $100 million revolving credit facility
(the "Unsecured Facility") which expires March 29, 1998. In connection with the
termination of the Secured Facility, the Company expensed as an extraordinary
item the unamortized deferred financing costs of $0.6 million (net of minority
interest of $0.3 million) which had been incurred. Interest on the outstanding
balance is payable monthly at a rate equal to the London Interbank Offered Rate
("LIBOR") plus 1.75%, or the prime rate, at the Company's option. In January
1997, the interest rate on the line was reduced to LIBOR plus 1.45%. A fee on
the unused portion of the Unsecured Facility is payable quarterly at a rate of
0.25% per annum. There was no outstanding balance at December 31, 1996.
The Unsecured Facility requires compliance with certain loan covenants relating
to debt service coverage, tangible net worth, cash flow, earnings, occupancy
rate, new development and dividends. The Company has remained in compliance with
these covenants since inception of the facility.
In January 1996, the Company's Operating Partnership completed a $100 million
public debt offering of 7.75% unsecured term notes due January 2001 (the "Term
Notes"), which are guaranteed by the Company. The five-year non-callable Term
Notes were priced at a discount of 99.952 to yield 7.85% to investors. Net
proceeds from the offering were used to pay down substantially all of the
borrowings under the Secured Facility. At December 31, 1996, in the opinion of
management, the fair value of the Term Notes was approximately $97 million. The
fair value was determined by calculating the present value of the future cash
flows of interest and principal at a discount rate for comparable obligations.
In October 1996, the Company's Operating Partnership completed a $100 million
offering of Remarketed Floating Rate Reset Notes (the "Reset Notes"), which are
guaranteed by the Company. The interest rate will reset quarterly and will equal
LIBOR plus 75 basis points during the first year. The spread and the spread
period for subsequent periods will be adjusted in whole or part at the end of
the first year pursuant to an agreement with the underwriters. Unless previously
redeemed, the Reset Notes will have a final maturity of October 23, 2001. Net
proceeds from the offering were used to repay all of the borrowings under the
Unsecured Facility and for working capital. The carrying amount of the Reset
Notes approximates their fair value.
Interest paid, excluding amounts capitalized, amounted to $4.8 million, $2.7
million and $1.0 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
6. LEASE AGREEMENTS
The Company is the lessor and sub-lessor of retail stores under operating leases
with term expiration dates ranging from 1997 to 2011. Most leases are renewable
for five years after expiration of the initial term at the lessee's option.
Future minimum lease receipts under non-cancelable operating leases as of
December 31, 1996, exclusive of renewal option periods, were as follows (in
thousands):
1997............ $58,202
1998............ 54,631
1999............ 50,260
2000............ 42,673
2001............ 32,967
Thereafter 60,087
-------------
$298,820
=============
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. LEASE AGREEMENTS (CONTINUED)
In 1987, a Predecessor partnership entered into a lease agreement for property
in California. Land was estimated to be approximately 37% of the fair market
value of the property. The portion of the lease attributed to land is classified
as an operating lease and the remainder as a capital lease. The initial lease
term is 25 years with two options of 5 and 4 1/2 years, respectively. The lease
provides for additional rent based on specific levels of income generated by the
property. No additional rental payments were incurred during 1996, 1995 or 1994.
The Company has the option to cancel the lease upon six months written notice
and six months advance payment of the then fixed monthly rent. If the lease is
canceled, the building and leasehold improvements revert to the lessor.
OPERATING LEASES
Future minimum rental payments under operating leases for land and
administrative offices as of December 31, 1996 were as follows (in thousands):
1997........... $1,169
1998........... 1,188
1999........... 1,208
2000........... 1,203
2001........... 786
Thereafter 9,542
-------------
$15,096
=============
Rental expense amounted to $1.1 million, $0.9 million and $0.8 million for the
years ended December 31, 1996, 1995 and 1994, respectively.
CAPITAL LEASE
A leased property included in rental properties at December 31 consists of the
following (in thousands):
1996 1995
----------------- ----------------
Building................................. $8,621 $8,621
Less accumulated amortization............ (3,247) (2,903)
----------------- ----------------
Leased property, net.................... $5,374 $5,718
================= ================
Future minimum payments under the capitalized building lease, including the
present value of net minimum lease payments as of December 31, 1996 are as
follows (in thousands):
1997....................................................... $1,053
1998....................................................... 1,085
1999....................................................... 1,117
2000....................................................... 1,151
2001....................................................... 1,185
Thereafter................................................. 14,953
----------------
Total minimum lease payments............................... 20,544
Amount representing interest............................... (10,739)
----------------
Present value of net minimum capital lease payments........ $9,805
================
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
In August 1995, the Company's President (and Chief Operating Officer) resigned
and entered into a separation agreement with the Company that included
consulting services to be provided through 1999, certain non-compete provisions,
and the acquisition of certain undeveloped real estate assets. Upon completion
of development, such real estate assets may be re- acquired by the Company, at
its option, in accordance with a pre-determined formula. Transactions related to
the separation agreement are not material to the financial statements of the
Company.
Management has determined that the foundation slab at one of its manufacturers'
outlet centers was installed improperly and will require corrective action. The
Company is in the process of settling with the original contractor and/or
engineers. Management believes that any associated costs incurred by the Company
for the corrective action will not have a material effect on the financial
position, operating results or liquidity of the Company.
The Company is not presently involved in any material litigation nor, to its
knowledge, is any material litigation threatened against the Company or its
properties, other than routine litigation arising in the ordinary course of
business. Management believes the costs, if any, incurred by the Company related
to any of this litigation will not materially affect the financial position,
operating results or liquidity of the Company.
8. RELATED PARTY INFORMATION
In September 1995, the Company transferred property with a book value of $4.8
million to its former President (a current unitholder) in exchange for a $4.0
million note secured by units in the Operating Partnership (the "secured note")
and an $0.8 million unsecured note receivable (the "unsecured note"). The
secured note bears interest at a rate of LIBOR plus 250 basis points per annum,
payable monthly, and is due upon the earlier of the maker obtaining permanent
financing on the property, the Company repurchasing the property under an option
agreement, the maker selling the property to an unaffiliated third party, or
January 1999. The unsecured note bears interest at a rate of 8.0% per annum and
is due upon the earlier of the Company repurchasing the property under an option
agreement, the maker selling the property to an unaffiliated third party, or
September 2000.
The Company loaned its joint venture limited partner in Solvang $3.2 million
under a promissory note to fund a portion of the limited partner's capital
contributions. Interest only on the outstanding balance is payable monthly at
the stated interest rate of 10.0% per annum. The note was due in 1996 and is
collateralized by the limited partner's interest in the property.
The Company leased space to related parties of approximately 61,000, 56,000 and
48,000 square feet during the years ended December 31, 1996, 1995 and 1994,
respectively. Rental income from those tenants, including reimbursement for
taxes, common area maintenance and advertising, totaled $1.3 million, $1.5
million and $1.3 million during the years ended December 31, 1996, 1995 and
1994, respectively.
Certain Directors and unitholders guarantee Company obligations under leases for
one of the properties. The Company has indemnified these parties from and
against any liability which they may incur pursuant to these guarantees.
9. DIVIDEND REINVESTMENT PLAN
Shareholders who own at least 100 shares of the Company's common stock are
eligible to reinvest dividends quarterly at a discount. Costs and commissions
associated with the plan are paid by the Company.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. STOCK OPTION PLAN
The Company elected Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB No. 25") and related Interpretations in
accounting, for its employee stock options. Under APB No. 25, no compensation
expense is recognized because the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant.
The alternative fair value accounting provided for under SFAS No. 123,
"Accounting for Stock- Based Compensation," is not applicable because it
requires use of option valuation models that were not developed for use in
valuing employee stock options.
The Company's 1993 Stock Option Plan provides for an aggregate of 1.4 million
authorized shares reserved for issuance. The exercise price per share of initial
grants of non-qualified options will be fixed by the Compensation Committee on
the date of grant. The exercise price per share of incentive stock options will
not be less than the fair market value of the common stock on the date of grant,
except in the case of incentive stock options granted to individuals owning more
than 10% of the total voting shares of the Company. Their exercise price will be
at least 110% of the fair market value at the date of grant. Non-qualified and
incentive stock options are exercisable for a period of ten years from the date
of grant. On the first anniversary of the grant date, 20% of the options may be
exercised and an additional 20% may be exercised on or after each of the second
through fifth anniversaries.
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1996: risk-free
interest rate of 6.18%; dividend yield of 8%; volatility factor of the expected
market price of the Company's common stock based on historical results of 0.206;
and an expected life of the option of four years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including expected stock price volatility. Because the
Company's employee stock options have characteristics significantly different
from those of traded options, and changes in the subjective input assumptions
can materially affect the fair value estimate, management believes the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options. The Company has elected not to present pro forma
information because the impact on reported net income is immaterial.
A summary of the Company's stock option activity, and related information for
the years ended December 31 follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
Options Wtd-avg Options Wtd-avg Options Wtd-avg
(000) Ex. price (000) Ex. price (000) Ex.price
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of year 170.0 $27.50 887.5 $24.17 917.5 $24.47
Granted 717.5 $23.38 50.0 $29.50 80.0 $28.88
Exercised - - (105.6) $24.59
Forfeited - (20.0) $23.38 (52.0) $24.49
------------ ------------ ------------
Outstanding end of year 887.5 $24.17 917.5 $24.47 839.9 $24.88
Exercisable at end of year 34.0 $27.50 207.5 $24.73 285.4 $24.62
Weighted average fair value of
options granted during the year N/A $3.49 $3.42
Exercise prices for options outstanding as of December 31, 1996 ranged from
$23.38 to $29.50 per share. The weighted average remaining contractual life of the options
was 8.1 years.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following summary represents the results of operations, expressed in
thousands except per share amounts, for each quarter during 1996 and 1995:
<TABLE>
<CAPTION>
March 31 June 30 September 30 December 31
--------------- --------------- --------------- ---------------
1996
<S> <C> <C> <C> <C>
Base rental revenue............ $12,677 $13,746 $14,737 $15,230
Total revenues................. 19,055 20,929 23,323 28,049
Income before
extraordinary item......... 4,761 5,456 5,593 5,651
Net income..................... 4,154 5,456 5,593 5,651
Income before extraordinary
item per weighted
average common share....... $ 0.41 $ 0.46 $ 0.47 $ 0.45
Net income per weighted
average common share....... $0.36 $0.46 $0.47 $0.45
1995
Base rental revenue............ $10,337 $11,426 $11,902 $12,360
Total revenues................. 15,075 17,675 18,786 20,979
Net income..................... 4,693 4,836 4,793 5,250
Net income per weighted
average common share....... $0.42 $0.43 $0.42 $0.45
</TABLE>
12. NON-CASH FINANCING AND INVESTING ACTIVITIES
During 1996 and 1995, the Operating Partnership issued units with an aggregate
fair market value of $1.6 million and $1.9 million, respectively, to acquire
properties.
During 1996, 1995 and 1994, respectively, 789,700, 105,000 and 115,000 Operating
Partnership units were converted to common shares.
In September 1995, the Company transferred property with a book value of $4.8
million to a unitholder in exchange for a $4.0 million note collateralized by
units in the Operating Partnership and an $0.8 million unsecured note.
In December 1995 and 1994 the Company declared distributions per share or unit
of $0.575 and $0.52, respectively, that were paid in January of each subsequent
year. In December 1996, the Company declared distributions per unit of $0.63.
The limited partners distributions were paid in January 1997.
In February 1994, the limited partner in Solvang contributed land with a value
of approximately $2.0 million to the joint venture partnership.
13. SUBSEQUENT EVENTS
On February 7, 1997, the Company signed a letter of intent to acquire Waikele
Factory Outlets, a 214,000 square foot manufacturer's outlet center located 15
miles west of Honolulu, Hawaii. Closing has been scheduled for the end of March
1997, subject to final due diligence review and documentation.
<PAGE>
<TABLE>
<CAPTION>
CHELSEA GCA REALTY, INC.
SCHEDULE III-CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1996
Cost Capitalized Step-Up Related
(Disposed of Subsequent to Acquisition
to Acquisition of Partnership
Initial Cost to Company (Improvements) Interest (1)
----------------------- ----------------- ---------------
Buildings, Buildings, Buildings,
Description Encum- Fixtures and Fixtures and Fixtures and
Outlet Center Name brances Land Equipment Land Equipment Land Equipment
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
American Tin
Cannery, CA $9,805 $- $ 8,621 $ - $ 6,378 $ - $ -
Lawrence
Riverfront, KS - - 14,300 15 2,322 - -
Liberty Village, NJ - 345 405 990 14,416 11,015 2,195
Folsom, CA - 4,169 10,465 3,218 13,018 - -
Aurora Farms, OH - 637 6,884 879 16,639 - -
OH
Woodbury - 4,448 16,073 5,039 51,198 - -
Common, NY
Petaluma - 3,735 - 2,934 28,707 - -
Village, CA
Desert Hills,CA - 975 - 2,470 50,668 830 4,936
Columbia - 934 - 428 11,340 497 2,647
Gorge, OR
Mammoth - 1,180 530 - 2,212 994 1,430
Lakes, CA
St. Helena, CA - 1,029 1,522 (25) 496 38 78
Patriot - 789 1,854 976 4,048 - -
Plaza, VA
Santa Fe, NM - 74 - 1,300 10,873 491 1,772
Corporate - - 60 - 2,333 - -
Offices, NJ, CA
Napa Valley, CA - 3,456 2,113 7,908 17,877 - -
Solvang, CA - - - 2,380 9,015 - -
Camarillo, CA - 4,000 - 4,304 33,418 - -
Clinton, CT - 4,124 43,636 - - - -
Wrentham, MA - 157 2,817 - - - -
Leesburg, VA - 136 - - - - -
Wall Township, NJ - 483 - - - - -
-------------------------------------------------------------------------------
$9,805 $33,631 $144,026 $32,816 $274,958 $13,865 $13,058
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Gross Amount Carried Life Used
at Close of Period to Compute
December 31, 1996 Depreciation
Buildings, in Latest
Description Fixtures and Accmulated Date of Income
Outlet Center Name Land Equipment Total Depreciation Construction Statement
- -----------------
<S> <C> <C> <C> <C> <C> <C>
American Tin
Cannery, CA $- $ 14,999 $ 14,999 $ 5,439 '87 25
Lawrence
Riverfront, KS 15 16,622 16,637 3,899 '90 40
Liberty Vill, NJ 12,350 17,016 29,366 2,173 '81 30
Folsom, CA 7,387 23,483 30,870 3,883 '90,'92,'93,'96 40
Aurora Farms, OH 1,516 23,523 25,039 2,798 '90'93,'94,'95 40
Woodbury Common, NY 9,487 67,271 76,758 15,239 '85,'93,'95 30
Petaluma Village, CA 6,669 28,707 35,376 2,052 '93,'95,'96 40
Desert Hills,CA 4,275 55,604 59,879 9,276 '90,'94,'95 40
Columbia Gorge, OR 1,859 13,987 15,846 2,583 '91,'94 40
Mammoth Lakes, CA 2,174 4,172 6,346 1,086 '78 40
St. Helena, CA 1,042 2,096 3,138 303 '83 40
Patriot Plaza, VA 1,765 5,902 7,667 1,146 '86,'93'95 40
Santa Fe, NM 1,865 12,645 14,510 1,229 '93 40
Corporate Offices, NJ, CA - 2,393 2,393 898 - 5
Napa Valley, CA 11,364 19,990 31,354 1,585 '62,'93'95 40
Solvang, CA 2,380 9,015 11,395 809 '94 40
Camarillo, CA 8,304 33,418 41,722 1,542 '94,'95'95 40
Clinton, CT 4,124 43,656 47,780 892 '95,'96 40
No Georgia,GA 2,960 34,726 37,686 1,222 '95,'96 40
Wrentham, MA 157 2,817 2,974 - '95,'96
Leesburg, VA 136 - 136 - '96
Wall Township, NJ 483 - 483 - '96
-----------------------------------------------------
$80,312 $432,042 $512,354 $58,054
=====================================================
</TABLE>
The aggregate cost of the land, building, fixtures and equipment for federal tax
purposes was approximately $512 million at December 31, 1996.
(1) As part of the formation transaction assets acquired for cash have been
accounted for as a purchase.
The step-up represents the amount of the purchase price that exceeds the net
book value of the assets acquired (see Note 1).
<PAGE>
<TABLE>
<CAPTION>
CHELSEA GCA REALTY, INC.
SCHEDULE III-COMBINED REAL ESTATE
AND ACCUMULATED DEPRECIATION (CONTINUED)
THE CHANGES IN TOTAL REAL ESTATE:
YEAR ENDED DECEMBER 31,
1996 1995 1994
--------------- ---------------- ----------------
<S> <C> <C> <C>
Balance, beginning of period............ $415,983 $332,834 $243,218
Additions............................... 96,621 89,871 89,708
Dispositions and other.................. (250) (6,722) (92)
--------------- ---------------- ----------------
Balance, end of period.................. $512,354 $415,983 $332,834
=============== ================ ================
THE CHANGES IN ACCUMULATED DEPRECIATION:
YEAR ENDED DECEMBER 31,
1996 1995 1994
--------------- ---------------- ----------------
Balance, beginning of period............ $41,373 $30,439 $22,119
Additions............................... 16,931 11,277 8,341
Dispositions and other.................. (250) (343) (21)
--------------- ---------------- ----------------
Balance, end of period.................. $58,054 $41,373 $30,439
=============== ================ ================
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 24th of March 1997.
CHELSEA GCA REALTY, INC.
By: /s/
David C. Bloom, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
Signature Title Date
/s/
- -------------- Chairman of the Board March 24, 1997
David C. Bloom President and Chief
Executive Officer
/s/
- -------------- Vice Chairman March 24, 1997
Barry M. Ginsburg
/s/
- ------------------- Executive Vice March 24, 1997
William D. Bloom President and Director
/s/ Executive Vice March 24, 1997
- ------------------- President and Chief
Leslie T. Chao Financial Officer
/s/
- ------------------- Vice President- March 24, 1997
Michael J. Clarke Finance and Principal
Accounting Officer
/s/
- ------------------- Director March 24, 1997
Brendan T. Byrne
/s/
- ------------------- Director March 24, 1997
Robert Frommer
/s/
- ------------------- Director March 24, 1997
Philip D. Kaltenbacher
/s/
- ------------------- Director March 24, 1997
Reuben S. Leibowitz
/s/
- --------------------- Director March 24, 1997
John D. Santoleri
AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
CHELSEA GCA REALTY PARTNERSHIP, L.P.,
A DELAWARE LIMITED PARTNERSHIP,
AS BORROWER,
AND
THE FIRST NATIONAL BANK OF BOSTON,
TOGETHER WITH THOSE ASSIGNEES
BECOMING PARTIES HERETO PURSUANT
TO SECTION 11.12, AS LENDERS,
AND
THE FIRST NATIONAL BANK OF BOSTON,
AS AGENT
Dated as of January 27, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.................................................1
1.1 CERTAIN DEFINED TERMS.....................................1
1.2 COMPUTATION OF TIME PERIODS..............................24
1.3 TERMS....................................................24
ARTICLE II LOANS AND LETTERS OF CREDIT...............................25
2.1 LOAN ADVANCES AND REPAYMENT..............................25
2.2 AUTHORIZATION TO OBTAIN LOANS............................27
2.3 LENDERS' ACCOUNTING......................................28
2.4 INTEREST ON THE LOANS....................................28
2.5 FEES.....................................................33
2.6 PAYMENTS.................................................34
2.7 INCREASED CAPITAL........................................35
2.8 NOTICE OF INCREASED COSTS................................35
2.9 LETTERS OF CREDIT........................................35
2.10 INCREASE IN FACILITY.....................................38
ARTICLE III PORTFOLIO PROPERTIES.....................................39
ARTICLE IV EFFECTIVE DATE; CONDITIONS TO LOANS.......................40
4.1 EFFECTIVE DATE...........................................40
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT .42
ARTICLE V REPRESENTATIONS AND WARRANTIES.............................43
5.1 BORROWER ORGANIZATION; PARTNERSHIP POWERS................43
5.2 BORROWER AUTHORITY.......................................43
5.3 REIT ORGANIZATION; CORPORATE POWERS......................44
5.4 REIT AUTHORITY...........................................44
5.5 OWNERSHIP OF BORROWER, EACH SUBSIDIARY AND PARTNERSHIP ..44
5.6 NO CONFLICT..............................................45
5.7 CONSENTS AND AUTHORIZATIONS..............................45
5.8 GOVERNMENTAL REGULATION..................................45
5.9 PRIOR FINANCIALS.........................................45
5.10 PROJECTIONS AND FORECASTS................................46
5.11 PRIOR OPERATING STATEMENTS...............................46
5.12 QUARTERLY OPERATING REPORTS..............................46
5.13 LITIGATION; ADVERSE EFFECTS..............................46
5.14 NO MATERIAL ADVERSE CHANGE...............................47
5.15 PAYMENT OF TAXES.........................................47
5.16 MATERIAL ADVERSE AGREEMENTS..............................47
5.17 PERFORMANCE..............................................47
5.18 FEDERAL RESERVE REGULATIONS..............................47
5.19 UNSECURED TERM NOTES.....................................48
5.20 REQUIREMENTS OF LAW......................................48
5.21 PATENTS, TRADEMARKS, PERMITS, ETC........................48
5.22 ENVIRONMENTAL MATTERS....................................48
5.23 UNENCUMBERED PROPERTIES..................................49
5.24 SOLVENCY.................................................49
5.25 TITLE TO ASSETS; NO LIENS................................49
5.26 USE OF PROCEEDS..........................................49
5.27 REIT CAPITALIZATION......................................49
5.28 ERISA....................................................49
5.29 STATUS AS A REIT.........................................50
5.30 OWNERSHIP................................................50
5.31 NYSE LISTING.............................................50
5.32 CURRENT CONSTRUCTION PROJECTS............................50
ARTICLE VI REPORTING COVENANTS.......................................51
6.1 FINANCIAL STATEMENTS AND OTHER FINANCIAL
AND OPERATING INFORMATION................................51
6.2 ENVIRONMENTAL NOTICES....................................56
6.3 CONFIDENTIALITY..........................................56
ARTICLE VII AFFIRMATIVE COVENANTS....................................57
7.1 EXISTENCE................................................57
7.2 QUALIFICATION, NAME......................................57
7.3 COMPLIANCE WITH LAWS, ETC................................57
7.4 PAYMENT OF TAXES AND CLAIMS..............................57
7.5 MAINTENANCE OF PROPERTIES; INSURANCE.....................58
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS ..58
7.7 MAINTENANCE OF PERMITS, ETC..............................59
7.8 CONDUCT OF BUSINESS......................................59
7.9 USE OF PROCEEDS..........................................59
7.10 SECURITIES LAW COMPLIANCE................................59
7.11 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS......60
7.12 NYSE LISTED COMPANY......................................60
7.13 PROPERTY MANAGEMENT......................................60
7.14 INTEREST RATE CONTRACTS..................................60
ARTICLE VIII NEGATIVE COVENANTS......................................60
8.1 LIENS....................................................60
8.2 TRANSFERS OF WOODBURY COMMON.............................61
8.3 RESTRICTIONS ON FUNDAMENTAL CHANGES......................61
8.4 ERISA....................................................61
8.5 AMENDMENT OF CONSTITUENT DOCUMENTS.......................62
8.6 DISPOSAL OF PARTNERSHIP INTERESTS OR STOCK
IN SUBSIDIARIES......................................... 63
8.7 MARGIN REGULATIONS.......................................63
8.8 WITH RESPECT TO THE REIT.................................63
8.9 ADDITIONAL UNSECURED BANK DEBT...........................63
8.10 RESTRICTIONS ON INDEBTEDNESS.............................64
8.11 CONSTRUCTION PROJECTS....................................65
8.12 DISCONTINUITY IN MANAGEMENT..............................66
ARTICLE IX FINANCIAL COVENANTS.......................................66
9.1 [Intentionally Deleted] .................................66
9.2 [Intentionally Deleted]..................................66
9.3 MINIMUM FAIR MARKET NET WORTH............................67
9.4 TOTAL LIABILITIES TO ADJUSTED ASSET VALUE RATIO..........67
9.5 MAXIMUM SECURED BORROWER DEBT............................67
9.6 OPERATING CASH FLOW TO DEBT SERVICE RATIO................67
9.7 UNENCUMBERED ASSETS TO TOTAL LIABILITIES RATIO...........67
9.8 AGGREGATE OCCUPANCY RATE.................................67
9.9 DISTRIBUTIONS............................................67
9.10 PERMITTED INVESTMENTS....................................68
9.12 CALCULATION..............................................68
ARTICLE X EVENTS OF DEFAULT; RIGHTS AND REMEDIES.....................69
10.1 EVENTS OF DEFAULT........................................69
10.2 RIGHTS AND REMEDIES......................................73
10.3 RESCISSION...............................................74
ARTICLE XI AGENCY PROVISIONS.........................................74
11.1 APPOINTMENT..............................................74
11.2 NATURE OF DUTIES.........................................75
11.3 LOAN DISBURSEMENTS.......................................76
11.4 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS...............77
11.5 RIGHTS, EXCULPATION, ETC.................................79
11.6 RELIANCE.................................................79
11.7 INDEMNIFICATION..........................................80
11.8 AGENT INDIVIDUALLY.......................................80
11.9 SUCCESSOR AGENT; RESIGNATION OF AGENT; REMOVAL OF AGENT. 81
11.10 CONSENT AND APPROVALS....................................82
11.11 AGENCY PROVISIONS RELATING TO CERTAIN ENFORCEMENT ACTIONS84
11.12 ASSIGNMENTS AND PARTICIPATIONS...........................84
11.13 RATABLE SHARING..........................................88
11.14 DELIVERY OF DOCUMENTS....................................88
11.15 NOTICE OF EVENTS OF DEFAULT..............................89
ARTICLE XII MISCELLANEOUS............................................89
12.1 EXPENSES.................................................89
12.2 INDEMNITY................................................90
12.3 CHANGE IN ACCOUNTING PRINCIPLES..........................91
12.4 AMENDMENTS AND WAIVERS...................................91
12.5 INDEPENDENCE OF COVENANTS................................93
12.6 NOTICES AND DELIVERY.....................................93
12.7 SURVIVAL OF WARRANTIES, INDEMNITIES AND AGREEMENTS.......94
12.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE....94
12.9 PAYMENTS SET ASIDE.......................................94
12.10 SEVERABILITY.............................................94
12.11 HEADING..................................................95
12.12 GOVERNING LAW............................................95
12.13 LIMITATION OF LIABILITY..................................95
12.14 SUCCESSORS AND ASSIGNS...................................95
12.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER
OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS..................95
12.16 COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES.............96
12.17 CONSTRUCTION.............................................96
12.18 OBLIGATIONS UNSECURED....................................97
12.19 ENTIRE AGREEMENT.........................................97
LIST OF EXHIBITS AND SCHEDULES
Exhibits:
A - Form of Assignment and Assumption
B - [Reserved]
C - Form of Quarterly Operating Report
D - Form of Compliance Certificate
E - Form of Loan Notes
F - Form of Notice of Borrowing
G - Form of Fixed Rate Notice
H - Form of Letter of Credit Request
Schedules:
1 - List of Unencumbered Properties
1.1 - List of Portfolio Properties which are not
Unencumbered Properties
5.5 - Partnerships and Subsidiaries
5.22 - Environmental Matters
5.32 - Current Construction Projects
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of January 27, 1997
and is among CHELSEA GCA REALTY PARTNERSHIP, L.P., a Delaware limited
partnership ("Borrower"), each of the Lenders, as hereinafter defined, and THE
FIRST NATIONAL BANK OF BOSTON, a national banking association ("FNBB") in its
capacity as agent and as a Lender.
RECITALS
A. Pursuant to that certain Credit Agreement dated as of March 29, 1996,
among Borrower, as borrower, and FNBB and certain other lenders named therein,
as lenders, and FNBB, as Agent,(the "Original Credit Agreement"), the Lenders
agreed to provide Borrower with an unsecured revolving loan facility on the
terms and conditions set forth therein (the "Facility").
B. Borrower has requested that Lenders modify certain of the terms and
conditions set forth in the Original Credit Agreement and the Lenders have
agreed to such modifications such that after the Effective Date, as hereinafter
defined, the Facility shall be subject to the terms and conditions set forth
herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement shall
have the following meanings (such meanings to be applicable, except to the
extent otherwise indicated in a definition of a particular term, both to the
singular and the plural forms of the terms defined):
"ACCOMMODATION OBLIGATIONS", as applied to any Person, means any
Indebtedness or other contractual obligation or liability, contingent or
otherwise, of another Person in respect of which that Person is liable,
including, without limitation, any such Indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including in respect of any Partnership in which
that Person is a general partner, Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase or otherwise
acquire such Indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received.
"ACCOUNTANTS" means Ernst & Young LLP, any other "big six" accounting firm
or another firm of certified public accountants of national standing selected by
Borrower and acceptable to Agent.
"ACQUISITION PRICE" means the aggregate purchase price for an asset
including bona fide purchase money financing provided by the seller and all (or
Borrower's Share of, as applicable) existing Indebtedness pertaining to such
asset.
"ADJUSTED ASSET VALUE" means, as at any date of determination, the sum
(without duplication of any item) of (i) cash and Cash Equivalents owned by
Borrower (excluding any tenant deposits), (ii) the outstanding principal balance
of the notes receivable reflected on the December 31, 1995 Financials and such
other notes receivable hereafter owned by Borrower as may be approved by the
Requisite Lenders, and (iii) an amount equal to (A) Operating Cash Flow for the
most recently ended Fiscal Quarter (as adjusted by Borrower to take into account
any acquisitions or dispositions of Properties owned by Borrower or any of its
Subsidiaries which adjustments must be approved by the Agent in its reasonable
discretion), TIMES (B) four (4), DIVIDED BY (C) 0.10.
"AFFILIATES" as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with"), as applied to any Person, means (i) the possession, directly or
indirectly, of the power to vote twenty-five percent (25%) or more of the
Securities having voting power for the election of directors of such Person or
otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities or by contract
or otherwise, or (ii) the ownership of a general partnership interest or a
limited partnership interest (or other ownership interest) representing
twenty-five percent (25%) or more of the outstanding limited partnership
interests or other ownership interests of such Person. In addition, any
corporation, partnership or other entity in which the ownership interests of
Borrower and its Subsidiaries represents ten percent(10%) or more of the
outstanding ownership interests shall be deemed to be an Affiliate of Borrower.
"AGENT" means FNBB in its capacity as agent for the Lenders under this
Agreement, and shall include any successor Agent appointed pursuant hereto and
shall be deemed to refer to FNBB in its individual capacity as a Lender where
the context so requires.
"AGGREGATE OCCUPANCY RATE" means, with respect to the Unencumbered
Properties at any time, the ratio, as of such date, expressed as a percentage,
of (i) the gross leasable area of all Unencumbered Properties occupied by
tenants paying rent pursuant to Leases other than Materially Defaulted Leases,
to (ii) the aggregate gross leasable area of all Unencumbered Properties,
excluding from both (i) and (ii) the gross leasable area of Construction
Projects prior to the date which is 3 months after the Rent Stabilization Date
for such Construction Project. Only premises which are actually open for
business shall be counted as occupied.
"AGREEMENT" means the Original Credit Agreement as amended and restated as
of the Effective Date by this Amended and Restated Credit Agreement and as the
same may be further amended, supplemented or modified from time to time.
"APPLICABLE LIBOR RATE MARGIN" means, as of any date of determination: (i)
1.125%, if Borrower's senior long-term unsecured debt obligations are rated at
least BBB+/Baa1 by one or both of the Rating Agencies,(ii) 1.25%, if Borrower's
senior long-term unsecured debt obligations are rated at least BBB/Baa2 by one
or both of the Rating Agencies,(iii) 1.375%, if Borrower's senior long-term
unsecured debt obligations are rated at least BBB-/Baa3 by one or both of the
Rating Agencies, or (iv) 1.45%, in any other case (including, without
limitation, if Borrower's senior long-term unsecured debt obligations are not
rated by either of the Rating Agencies).
"ASSIGNMENT AND ASSUMPTION" means an Assignment and Assumption in the form
of EXHIBIT A hereto (with blanks appropriately filled in) delivered to Agent in
connection with each assignment of a Lender's interest under this Agreement
pursuant to SECTION 11.12.
"ATC PARTNERSHIP" means Cannery Row Associates, a California limited
partnership in which the Borrower is the sole limited partner (having a 99%
interest) and the REIT is the sole general partner (having a 1% interest).
"BASE RATE" means, on any day, the higher of (i) the base rate of interest
per annum established from time to time by FNBB at its principal office in
Boston, Massachusetts, and designated as its "base rate" as in effect on such
day, or (ii) the Federal Funds Rate in effect on such day PLUS one-half percent
(0.5%) per annum.
"BASE RATE LOANS" means those Loans bearing interest at the Base Rate.
"BENEFIT PLAN" means any employee pension benefit plan as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which a
Person or an ERISA Affiliate is, or within the immediately preceding five (5)
years was, an "employer" as defined in Section 3(5) of ERISA.
"BORROWER DEBT" means (without duplication) all Indebtedness of Borrower or
any Subsidiary of Borrower, without offset or reduction in respect of prepaid
interest, restructuring fees or similar items minus, in the case of Nonrecourse
Indebtedness of a Partnership that is otherwise included in Indebtedness of
Borrower, the amount of such Indebtedness in excess of Borrower's Share thereof.
"BORROWER'S SHARE" means, in the case of a Partnership, Borrower's
percentage ownership interest in such Partnership.
"BORROWING" means a borrowing under the Facility.
"BUSINESS DAY" means (i) with respect to any Borrowing, payment or rate
determination of LIBOR Loans, a day, other than a Saturday or Sunday, on which
Agent is open for business at its head office and on which dealings in Dollars
are carried on in the London interbank market, and (ii) for all other purposes
any day excluding Saturday, Sunday and any day which is a legal holiday under
the laws of the Commonwealth of Massachusetts, or is a day on which banking
institutions located in Massachusetts are required or authorized by law or other
governmental action to close.
"CAPITAL LEASES", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is or should be accounted for as a capital lease on the balance sheet
of that Person.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year after the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within ninety (90) days after the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from any two of Standard & Poor's Corporation,
Moody's Investors Services, Inc., Duff and Phelps, or Fitch Investors (or, if at
any time no two of the foregoing shall be rating such obligations, then from
such other nationally recognized rating services as may be acceptable to Agent)
and not listed for possible down-grade in Credit Watch published by Standard &
Poor's Corporation; (iii) commercial paper, other than commercial paper issued
by Borrower or any of its Affiliates, maturing no more than ninety (90) days
after the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 or P-1 from either Standard & Poor's Corporation or
Moody's Investor's Service, Inc. (or, if at any time neither Standard & Poor's
Corporation nor Moody's Investor's Service, Inc. shall be rating such
obligations, then the highest rating from such other nationally recognized
rating services as may be acceptable to Agent); (iv) domestic and Eurodollar
certificates of deposit or time deposits or bankers' acceptances maturing within
ninety (90) days after the date of acquisition thereof, overnight securities
repurchase agreements, or reverse repurchase agreements secured by any of the
foregoing types of securities or debt instruments issued, in each case, by (A)
any commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia having combined capital and
surplus of not less than Two Hundred Fifty Million Dollars ($250,000,000) or (B)
any Lender, and (v) deposits in existing Merrill Lynch money market accounts
maintained by Borrower, such deposits being the proceeds from the exercise of
stock options pursuant to Borrower's employee stock option plans.
"CIP BUDGET AMOUNT" means the total budgeted cost (as such budget shall be
updated from time to time) of all Current Construction Projects (excluding Minor
Expansion Projects) owned by Borrower or any of its Subsidiaries or by any GP
Partnership or with respect to which Borrower, any of its Subsidiaries or any GP
Partnership has any type of funding obligation, construction management
obligation or obligation to assure project completion or leasing. Such costs
shall include, without limitation, all land acquisition costs (but may exclude
costs of land used for expansion projects which was not purchased for the
purpose of such expansion project), design and permitting costs, construction
period real estate taxes, leasing costs including brokers' commissions and
tenant improvements, allowances or reimbursements, construction costs and
opening costs. With respect to any Construction Projects financed with
Indebtedness other than this Facility, such costs shall also include
construction period interest and all fees and expenses associated with such
Indebtedness.
"CLOSING DATE" means March 29, 1996.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITMENT" means, with respect to any Lender, the principal amount set
out under such Lender's name under the heading "Loan Commitment" on the
signature pages attached to this Agreement or to any Amendment pursuant to
SECTION 2.10 or as set forth on an Assignment and Assumption executed by such
Lender, as assignee.
"COMPLETION DATE" means, with respect to a Construction Project, the date
on which certificates of occupancy (or the equivalent) have been issued for at
least 90% of the gross leasable area of such Construction Project.
"COMPLIANCE CERTIFICATE" means a certificate in the form of EXHIBIT D
delivered to Agent by Borrower pursuant to SECTION 2.1.2, SECTION 2.9.2, SECTION
3.1, SECTION 6.1.4, SECTION 6.1.11 or any other provision of this Agreement and
covering Borrower's compliance with the financial covenants contained in ARTICLE
IX.
"CONFIDENTIAL INFORMATION" has the meaning ascribed to such term in SECTION
6.3.
"CONSTRUCTION PROJECT" means a project consisting of the construction of
new buildings, additions to existing buildings, and/or rehabilitation of
existing buildings (other than normal refurbishing and tenant fit-up work when
one retail outlet tenant leases space previously occupied by another retail
outlet tenant).
"CONTAMINANT" means any pollutant (as that term is defined in 42 U.S.C.
9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C. 1362(13)),
hazardous substance (as that term is defined in 42 U.S.C. 9601(14)), hazardous
chemical (as that term is defined by 29 CFR Section 1910.1200(c)), toxic
substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)),
radioactive material, special waste, petroleum (including crude oil or any
petroleum-derived substance, waste, or breakdown or decomposition product
thereof), any constituent of any such substance or waste, including, but not
limited to, polychlorinated biphenyls and asbestos, or any other substance or
waste deleterious to the environment the release, disposal or remediation of
which is now or at any time becomes subject to regulation under any
Environmental Law.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of
any Securities issued by that Person or any indenture, mortgage, deed of trust,
lease, contract, undertaking, document or instrument to which that Person is a
party or by which it or any of its properties is bound, or to which it or any of
its properties is subject (including, without limitation, any restrictive
covenant affecting such Person or any of its properties).
"COURT ORDER" means any judgment, writ, injunction, decree, rule or
regulation of any court or Governmental Authority binding upon or applicable to
the Person in question.
"CURRENT CONSTRUCTION PROJECT" means a Construction Project from the time
of commencement of construction of footings and foundations for such
Construction Project until the Rent Stabilization Date of such Construction
Project.
"DEBT SERVICE" means, for any period, Interest Expense for such period PLUS
scheduled principal amortization (I.E., excluding any balloon payment due at
maturity) for such period on all Borrower Debt.
"DECEMBER 31, 1995 FINANCIALS" has the meaning given to such term in
SECTION 5.9.
"DEFAULTING LENDER" means any Lender which fails or refuses to perform its
obligations under this Agreement within the time period specified for
performance of such obligation or, if no time frame is specified, if such
failure or refusal continues for a period of five (5) Business Days after notice
from Agent.
"DOL" means the United States Department of Labor and any successor
department or agency.
"DOLLARS" AND "$" means the lawful money of the United States of America.
"DRAWING DATE" means the date on which a draft under a Letter of Credit is
paid by the Agent.
"EBITDA" means, at any time, for the most recent Fiscal Quarter, the
Borrower's earnings (or loss) before interest, taxes, depreciation and
amortization, calculated for such period on a consolidated basis in conformity
with GAAP and excluding earnings attributable to minority interests MINUS gains
(and PLUS losses) from extraordinary items or asset sales or write-ups or
forgiveness of Indebtedness.
"EFFECTIVE DATE" means January 27, 1997 so long as all conditions set forth
in SECTION 4.1 are satisfied on or before January 31, 1997 and otherwise shall
mean the date on which the last of such conditions is satisfied.
"ELIGIBLE ASSIGNEE" means (i) (A) (1) a commercial bank organized under the
laws of the United States or any state thereof; (2) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; or (3) a commercial bank organized under the laws of any other
country or a political subdivision thereof, PROVIDED that (x) such bank is
acting through a branch or agency located in the United States, or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; that (B) in each case, is (1) reasonably acceptable to Agent and
Borrower, and (2) has total assets in excess of $10,000,000,000 and a rating on
its (or its parent's) senior unsecured debt obligations of at least BBB by one
of the Rating Agencies; or (ii) any Lender or Affiliate of any Lender; PROVIDED
that no Affiliate of Borrower shall be an Eligible Assignee.
"ENVIRONMENTAL LAWS" has the meaning set forth in SECTION 5.22.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental Authority
for (i) any liability under Environmental Laws, or (ii) damages arising from, or
costs incurred by such Governmental Authority in response to, a Release or
threatened Release of a Contaminant into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" of any Person means any (i) corporation which is,
becomes, or is deemed to be a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Internal Revenue Code)
as such Person, (ii) partnership, trade or business (whether or not
incorporated) which is, becomes or is deemed to be under common control (within
the meaning of Section 414(c) of the Internal Revenue Code) with such Person,
(iii) other Person which is, becomes or is deemed to be a member of the same
"affiliated service group" (as defined in Section 414(m) of the Internal Revenue
Code) as such Person, or (iv) any other organization or arrangement described in
Section 414(o) of the Internal Revenue Code which is, becomes or is deemed to be
required to be aggregated pursuant to regulations issued under Section 414(o) of
the Internal Revenue Code with such Person pursuant to Section 414(o) of the
Internal Revenue Code.
"EVENT OF DEFAULT" means any of the occurrences set forth in ARTICLE X
after the expiration of any applicable grace period expressly provided therein.
"EXECUTIVE OFFICERS" mean David C. Bloom, William D. Bloom, Barry M.
Ginsburg, Leslie T. Chao and Thomas J. Davis.
"FACILITY" means the loan facility of One Hundred Million Dollars
($100,000,000) described in SECTION 2.1.1, subject, however, to possible
increase of the Facility, in one or more increments, to an amount not greater
than Two Hundred Million Dollars ($200,000,000), in accordance with SECTION
2.10.
"FAIR MARKET NET WORTH" means the Borrower's Adjusted Asset Value less
Total Liabilities less any minority interests set forth in the Liabilities and
Partner's Capital portion of Borrower's Financial Statements prepared in
accordance with GAAP. If Borrower's Financial Statements are unavailable and
minority interests are determined with reference to the REIT's Financial
Statements, minority interests in Borrower shall be excluded.
"FDIC" means the Federal Deposit Insurance Corporation or any successor
thereto.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal Funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal Funds brokers of recognized
standing selected by Agent.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal Reserve
System or any governmental authority succeeding to its functions.
"FINANCIAL STATEMENTS" has the meaning given to such term in SECTION 6.1.2.
"FISCAL QUARTER" means each three-month period ending on March 31, June 30,
September 30 and December 31.
"FISCAL YEAR" means the fiscal year of Borrower which shall be the twelve
(12) month period ending on the last day of December in each year.
"FIXED RATE NOTICE" means, with respect to a LIBOR Loan pursuant to SECTION
2.1.2, a notice substantially in the form of EXHIBIT G.
"FIXED RATE PREPAYMENT FEE" has the meaning given to such term in SECTION
2.4.8(C).
"FOREIGN AFFILIATES" means Value Retail PLC, a corporation formed under the
laws of Great Britain and any other partnership or entity which may be sponsored
by or affiliated with Value Retail PLC and any other Affiliate (which may need
to be approved by Agent pursuant to SECTION 8.3) which may develop, own or
finance one or more Foreign Properties.
"FOREIGN INVESTMENTS" means the aggregate amount of all Investments by
Borrower in Borrower's Foreign Affiliates plus the face amount of all Letters of
Credit issued hereunder (or letters of credit issued by any other Person with
respect to which Borrower is directly or contingently liable) for the benefit of
such Foreign Affiliates, plus the aggregate Acquisition Prices of all Foreign
Properties owned by Borrower or its Subsidiaries.
"FOREIGN PROPERTIES" means all Properties which are not located within the
boundaries of the United States.
"FUNDING DATE" means, with respect to any Loan made after the Closing Date,
the date of the funding of such Loan.
"FUNDS FROM OPERATIONS" means, for any period, the Borrower's Funds From
Operations determined in accordance with the definition approved by the National
Association of Real Estate Investment Trusts.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local, municipal or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GP PARTNERSHIP" means any Partnership in which Borrower, the REIT or any
Subsidiary of Borrower or the REIT is a general partner. As provided in SECTION
8.8.1 the REIT may not become a partner in any additional Partnerships.
"GUARANTY" means the Guaranty dated March 29, 1996 executed by the REIT in
favor of the Agent and the Lenders as ratified by Ratification of Guaranty of
even date herewith.
"INDEBTEDNESS", as applied to any Person (determined on a consolidated
basis and without duplication), means the sum of (i) all indebtedness,
obligations or other liabilities of such Person for borrowed money, (ii) all
indebtedness, obligations or other liabilities of such Person evidenced by
Securities or other similar instruments, (iii) all reimbursement obligations and
other liabilities of such Person with respect to letters of credit or banker's
acceptances issued for such Person's account, (iv) all obligations of such
Person to pay the deferred purchase price of Property or services or to
reimburse tenants for the costs of improvements constructed by such tenants on
the Property of such Person, (v) all obligations in respect of Capital Leases of
such Person, (vi) all Accommodation Obligations of such Person, (vii) all
indebtedness, obligations or other liabilities of such Person or others secured
by a Lien on any asset of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by, or are a personal liability of, such
Person (including, without limitation, the principal amount of any assessment or
similar indebtedness encumbering any property), (viii) all indebtedness,
obligations or other liabilities (other than interest expense liability) in
respect of Interest Rate Contracts and foreign currency exchange agreements, and
(ix) ERISA obligations currently due and payable. Indebtedness shall not include
accrued ordinary operating expenses payable on a current basis.
"INTEREST EXPENSE" means, for any period, total interest expense, whether
paid, accrued or capitalized (including the interest component of Capital
Leases) in respect of Borrower Debt, including, without limitation, amortization
of loan acquisition costs, all commissions, discounts and other fees and charges
owed with respect to letters of credit, net costs under Interest Rate Contracts,
and Unused Facility Fees payable to Lenders.
"INTEREST PERIOD" means, relative to any LIBOR Loans comprising part of the
same Borrowing, the period beginning on (and including) the date on which such
LIBOR Loans are made as, or converted into, LIBOR Loans, and ending on (but
excluding) the day which numerically corresponds to such date thirty (30), sixty
(60) or ninety (90) days thereafter, in either case as Borrower may select in
its relevant Notice of Borrowing pursuant to SECTION 2.1.2; PROVIDED, HOWEVER,
that:
(a) if such Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next following Business Day;
and
(b) no Interest Period may end later than the then applicable Termination
Date.
"INTEREST RATE CONTRACTS" means, collectively, interest rate swap, collar,
cap or similar agreements providing interest rate protection.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended
from time to time hereafter, and any successor statute.
"INVESTMENT" means, as applied to any Person, any direct or indirect
purchase or other acquisition by that Person of Securities, or of a beneficial
interest in Securities, of any other Person, and any direct or indirect loan,
advance (other than deposits with financial institutions available for
withdrawal on demand, prepaid expenses, advances to employees and similar items
made or incurred in the ordinary course of business), or capital contribution by
such Person to any other Person, including all Indebtedness and accounts owed by
that other Person which are not current assets or did not arise from sales of
goods or services to that Person in the ordinary course of business.
"INVESTMENT MORTGAGES" mean notes receivable or other indebtedness secured
by mortgages or other security interests directly or indirectly owned by
Borrower or any Subsidiary of Borrower, including certificates of interest in
real estate mortgage investment conduits.
"INVESTMENT PARTNERSHIP" means any Partnership in which Borrower or any
Subsidiary of Borrower has an ownership interest, whose financial results are
not consolidated under GAAP in the Financial Statements.
"IRS" means the Internal Revenue Service and any Person succeeding to the
functions thereof.
"ISSUANCE DATE" means the date of issuance of any Letters of Credit.
"LAND" means unimproved real estate, including future phases of a partially
completed project, owned by Borrower or any Subsidiary of Borrower for the
purpose of future development of improvements. For purposes of the foregoing
definition, "unimproved" shall mean Land on which the construction of building
improvements has not commenced or land on which construction has been
discontinued for a continuous period longer than sixty (60) days prior to
completion.
"LEASE" means a lease or license between Borrower and a tenant or licensee
with respect to premises located within a Portfolio Property.
"LENDER TAXES" has the meaning given to such term in SECTION 2.4.7.
"LENDERS" means FNBB and any other bank, finance company, insurance or
other financial institution which is or becomes a party to this Agreement by
execution of a counterpart signature page hereto or an Assignment and
Assumption, as assignee. With respect to matters requiring the consent to or
approval of all Lenders at any given time, all then existing Defaulting Lenders
will be disregarded and excluded, and, for voting purposes only, "all Lenders"
shall be deemed to mean "all Lenders other than Defaulting Lenders".
"LETTER OF CREDIT" means a letter of credit issued by the Agent for the
account of Borrower pursuant to SECTION 2.9.
"LIABILITIES AND COSTS" means all claims, judgments, liabilities,
obligations, responsibilities, losses, damages (including lost profits),
punitive or treble damages, costs, disbursements and expenses (including,
without limitation, reasonable attorneys, experts' and consulting fees and costs
of investigation and feasibility studies), fines, penalties and monetary
sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future.
"LIBOR" means, relative to any Interest Period for any LIBOR Loan included
in any Borrowing, the per annum rate (reserve adjusted as hereinbelow provided)
of interest quoted by Agent, rounded upwards, if necessary, to the nearest
one-sixteenth of one percent (0.0625%) at which Dollar deposits in immediately
available funds are offered to Agent by leading banks in the Eurodollar
interbank market two (2) Business Days prior to the beginning of such Interest
Period, for delivery on the first day of such Interest Period for a period
approximately equal to such Interest Period and in an amount equal or comparable
to the LIBOR Loan to which such Interest Period relates. The foregoing rate of
interest shall be reserve adjusted by dividing LIBOR by one (1.00) minus the
LIBOR Reserve Percentage, with such quotient to be rounded upward to the nearest
whole multiple of one-hundredth of one percent (0.01%). All references in this
Agreement or other Loan Documents to LIBOR shall mean and include the aforesaid
reserve adjustment.
"LIBOR LOAN" means a Loan bearing interest, at all times during an Interest
Period applicable to such Loan, at a fixed rate of interest determined by
reference to LIBOR.
"LIBOR OFFICE" means, relative to any Lender, the office of such Lender
designated as such on the counterpart signature pages hereto or such other
office of a Lender as designated from time to time by notice from such Lender to
Agent, whether or not outside the United States, which shall be making or
maintaining LIBOR Loans of such Lender.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for LIBOR
Loans made by any Lender, the reserve percentage (expressed as a decimal) equal
to the actual aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transactional adjustments or other scheduled changes in reserve requirements)
announced within Agent as the reserve percentage applicable to Agent as
specified under regulations issued from time to time by the Federal Reserve
Board. The LIBOR Reserve Percentage shall be based on Regulation D of the
Federal Reserve Board or other regulations from time to time in effect
concerning reserves for "Eurocurrency Liabilities" from related institutions as
though Agent were in a net borrowing position.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance (including, but
not limited to, easements, rights-of-way, zoning restrictions and the like),
lien (statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including without
limitation any conditional sale or other title retention agreement, the interest
of a lessor under a Capital Lease, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement or document having similar effect (other than a financing statement
filed by a "true" lessor pursuant to Section 9408 of the Uniform Commercial
Code) naming the owner of the asset to which such Lien relates as debtor, under
the Uniform Commercial Code or other comparable law of any jurisdiction.
"LOAN ACCOUNT" has the meaning given to such term in SECTION 2.3.
"LOAN DOCUMENTS" means this Agreement, the Loan Notes, the Guaranty and all
other agreements, instruments and documents (together with amendments and
supplements thereto and replacements thereof) now or hereafter executed by the
Borrower, which evidence relates to the Obligations.
"LOAN NOTES" means the promissory notes dated March 29, 1996 evidencing the
Loans in the aggregate original principal amount of One Hundred Million Dollars
($100,000,000) executed by Borrower in favor of Lenders, as they may be amended,
supplemented, replaced or modified from time to time. Any replacements of the
initial Loan Notes shall be substantially in the form of EXHIBIT E.
"LOANS" means the loans made pursuant to the Facility.
"MAJORITY PARTNERSHIP" means any Partnership in which Borrower has an
ownership interest, whose financial results are consolidated under GAAP in the
Financial Statements.
"MATERIAL ADVERSE EFFECT" means, with respect to a Person or Property, a
material adverse effect upon the condition (financial or otherwise), operations,
performance or properties of such Person or Property. The phrase "has a Material
Adverse Effect" or "will result in a Material Adverse Effect" or words
substantially similar thereto shall in all cases be intended to mean "has
resulted, or will or could reasonably be anticipated to result, in a Material
Adverse Effect", and the phrase "has no (or does not have a) Material Adverse
Effect" or "will not result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "does not or will not or
could not reasonably be anticipated to result in a Material Adverse Effect".
"MATERIALLY DEFAULTED LEASES" means Leases under which the tenant has
failed to make any payment of base rent, percentage rent or additional rent when
due and such failure has continued for more than sixty (60) days after the due
date of the applicable payment or any Lease which the Borrower has terminated
based on any default by the Tenant thereunder.
"MAXIMUM LOAN AMOUNT" means, at any time, the amount of the Facility from
time to time less the aggregate face amount of the Letters of Credit outstanding
hereunder, provided, however, that after any Event of Default has occurred and
until the same shall have been remedied or waived pursuant to SECTION 12.4, the
Maximum Loan Amount shall be zero.
"MINOR EXPANSION PROJECTS" means Construction Projects consisting of the
construction of additional buildings or building additions at an existing
operating outlet center Property so long as the cumulative increase in the gross
leasable area of such Property as a result of all such Construction Projects
started during any two consecutive calendar years does not exceed 10,000 square
feet.
"MULTIEMPLOYER PLAN" means an employee benefit plan defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by a Person or an ERISA Affiliate of such Person.
"NET OFFERING PROCEEDS" means all cash proceeds received by the REIT as a
result of the sale of common, preferred or other classes of stock in the REIT
(if and only to the extent reflected in stockholders' equity on the consolidated
balance sheet of the REIT prepared in accordance with GAAP) LESS customary costs
and discounts of issuance paid by the REIT, all of which proceeds shall have
been concurrently contributed by the REIT to Borrower as additional capital.
"NON PRO RATA LOAN" means a Loan with respect to which fewer than all
Lenders have funded their respective Pro Rata Shares of such Loans and the
failure of the non-funding Lender or Lenders to fund its or their respective Pro
Rata Shares of such Loan constitutes a breach of this Agreement.
"NON-OUTLET PROPERTIES" means Portfolio Properties which are not intended
to be used as or in connection with an outlet center Property including
residential or other Properties in the vicinity of Construction Projects
acquired to facilitate the obtaining of governmental permits or the resolution
of zoning or land use issues related to such Construction Projects.
"NONRECOURSE INDEBTEDNESS" means Indebtedness with respect to which
recourse for payment is contractually limited to specific assets encumbered by a
Lien securing such Indebtedness.
"NOTICE OF BORROWING" means, with respect to a proposed Borrowing pursuant
to SECTION 2.1.2, a notice substantially in the form of EXHIBIT F.
"OBLIGATIONS" means, from time to time, all Indebtedness of Borrower owing
to Agent, any Lender or any Person entitled to indemnification pursuant to
SECTION 12.2, or any of their respective successors, transferees or assigns, of
every type and description, whether or not evidenced by any note, guaranty or
other instrument, arising under or in connection with this Agreement or any
other Loan Document, whether or not for the payment of money, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however acquired. The
term includes, without limitation, all interest, charges, expenses, fees,
reasonable attorneys' fees and disbursements, reasonable fees and disbursements
of expert witnesses and other consultants, and any other sum now or hereinafter
chargeable to Borrower under or in connection with this Agreement or any other
Loan Document.
"OFFICER'S CERTIFICATE" means a certificate signed by a specified officer
of a Person certifying as to the matters set forth therein.
"OPERATING CASH FLOW" means, at any time, for the most recent Fiscal
Quarter, EBITDA MINUS cash income taxes paid during such Fiscal Quarter and not
deducted on the Financial Statements in determining earnings for such Fiscal
Quarter or any prior period MINUS the Replacement Reserve Amount for the
Portfolio Properties.
"PAD SITES" means unimproved land parcels which may be legally subdivided
from Portfolio Properties and sold subject to restrictions which limit such land
to uses compatible with the use of such Portfolio Property provided that the
total area of all Pad Sites sold out of any Portfolio Property shall not exceed
20% of the total land area of the applicable Portfolio Property on the date
hereof.
"PARTNERSHIP" means any general or limited partnership, joint venture,
corporation, limited liability company or limited liability partnership in which
Borrower, the REIT or any Subsidiary of Borrower or the REIT has an ownership
interest and which is not a Wholly-Owned Subsidiary.
"PARTNERSHIP AGREEMENT" means, with respect to any Partnership, on a
collective basis, its partnership agreement, its agreement of limited
partnership agreement and certificate of limited partnership (if any), its
operating or management agreement and articles or certificate of organization,
or other organizational or governance document(s).
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"PERMIT" means any permit, approval, authorization, license, variance or
permission required from a Governmental Authority under an applicable
Requirement of Law.
"PERMITTED LIENS" means:
(a) Liens (other than Environmental Liens and any Lien
imposed under ERISA) for taxes, assessments or charges of any
Governmental Authority or claims not yet due or not yet required to be
paid pursuant to SECTION 7.4;
(b) Liens (other than any Lien imposed under ERISA)
incurred or deposits made in the ordinary course of business (including
without limitation surety bonds and appeal bonds) in connection with
workers' compensation, unemployment insurance and other types of social
security benefits or to secure the performance of tenders, bids,
leases, contracts (other than for the repayment of Indebtedness),
statutory obligations;
(c) any laws, ordinances, easements, rights of way,
restrictions, exemptions, reservations, conditions, defects or
irregularities in title, limitations, covenants or other matters that,
in the aggregate, do not in the reasonable opinion of Borrower (i)
materially interfere with the occupation, use and enjoyment of the
Property or other assets encumbered thereby, by the Person owning such
Property or other assets, in the normal course of its business or (ii)
materially impair the value of the Property subject thereto;
(d) Liens imposed by laws, such as mechanics' liens and
other similar liens arising in the ordinary course of business which
either (i) have been in existence for less than 120 days from the date
of filing or (ii) have been in existence for longer than said 120 days
so long as the aggregate amount of all such Liens is less than $100,000
for each Construction Project and the Borrower is in good faith
contesting the validity or amount thereof by appropriate proceedings,
provided however that any Lien permitted under this paragraph must be
discharged prior to foreclosure thereof;
(e) Leases to tenants which are not Affiliates of Borrower
existing on the date hereof or subsequently entered into in the
ordinary course of business;
(f) Liens securing judgments or awards permitted by
SECTION 8.10(D); and
(g) Liens securing purchase money Indebtedness permitted
by SECTION 8.10(F) provided that each such Lien shall encumber only the
specific item of equipment purchased with the proceeds of the
Indebtedness secured thereby.
"PERSON" means any natural person, employee, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, or
any other non-governmental entity, or any Governmental Authority.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA
(other than a Multiemployer Plan) in respect of which Borrower or an ERISA
Affiliate, as applicable, is an "employer" as defined in Section 3(5) of ERISA.
"PORTFOLIO OCCUPANCY RATE" means, with respect to the Portfolio Properties
at any time, the ratio, as of such date, expressed as a percentage, of (i) the
gross leasable area of all Portfolio Properties occupied by tenants paying rent
pursuant to Leases other than Materially Defaulted Leases, to (ii) the aggregate
gross leasable area of all Portfolio Properties excluding from both (i) and (ii)
the gross leasable area of Construction Projects thereon prior to the date which
is 3 months after the Rent Stabilization Date for such Construction Project.
Only premises which are actually open for business shall be counted as occupied.
Non-Outlet Properties shall be excluded from Portfolio Properties for purposes
of this definition.
"PORTFOLIO PROPERTIES" means real property improved with one or more
completed buildings that is owned directly or indirectly, in whole or in part,
by Borrower, any Subsidiary of Borrower or any Partnership, including the
Unencumbered Properties and the Properties listed on SCHEDULE 1.1, as such
schedule may be updated from time to time to reflect the acquisition or
disposition of Portfolio Properties.
"PREPAYMENT DATE" has the meaning given to such term in SECTION 2.4.8(C).
"PRO RATA SHARE" means, with respect to any Lender, a fraction (expressed
as a percentage), the numerator of which shall be the amount of such Lender's
Commitment and the denominator of which shall be the aggregate amount of all of
the Lenders' Commitments.
"PROCEEDINGS" means, collectively, all actions, suits and proceedings
before, and investigations commenced or threatened by or before, any court or
Governmental Authority with respect to a Person.
"PROPERTY" means, as to any Person, all real or personal property
(including, without limitation, buildings, facilities, structures, equipment and
other assets, tangible or intangible) owned by such Person.
"QUARTERLY OPERATING REPORT" has the meaning given to such term in SECTION
6.1.1.
"RATING AGENCY" means either of (i) Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. or (ii) Moody's Investors Services, Inc.
"REGULATIONS G, T, U AND X" mean such Regulations of the Federal Reserve
Board as in effect from time to time.
"RELEASE" means the release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or
property.
"REMEDIAL ACTION" means any action required by applicable Environmental
Laws to (i) clean up, remove, treat or in any other way address Contaminants in
the indoor or outdoor environment; (ii) prevent the Release or threat of Release
or minimize the further Release of Contaminants so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; or (iii) perform preremedial studies and investigations and
post-remedial monitoring and care.
"RENT STABILIZATION DATE" means, with respect to each Construction Project,
the date which shall be (i) the first day of a Fiscal Quarter (ii) not more than
six (6) months after the date on which the first certificate of occupancy (or
the equivalent) has been issued for any portion of such Construction Project and
(iii) set forth in a notice from Borrower to Agent given prior to such Rent
Stabilization Date.
"REPLACEMENT RESERVE AMOUNT" means, with respect to any Property or group
of Properties for any Fiscal Quarter, a reserve for recurring capital
expenditures equal to the product of $0.15 times the gross leasable area of such
Property or group of Properties excluding the gross leasable area of any
Construction Project thereon prior to the Rent Stabilization Date with respect
to such Construction Project.
"REPORTABLE EVENT" means any of the events described in Section 4043(b) of
ERISA, other than an event for which the thirty (30) day notice requirement is
waived by regulations.
"REQUIREMENTS OF LAW" mean, as to any Person, the charter and by-laws,
Partnership Agreement or other organizational or governing documents of such
Person, and any law, rule or regulation, Permit, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject, including without limitation, the Securities
Act, the Securities Exchange Act, Regulations G, T, U and X, FIRREA and any
certificate of occupancy, zoning ordinance, building, environmental or land use
requirement or Permit or occupational safety or health law, rule or regulation.
"REQUISITE LENDERS" mean, collectively, Lenders whose Pro Rata Shares, in
the aggregate, are at least sixty-six and two-thirds percent (66-2/3%), PROVIDED
that, in determining such percentage at any given time, all then existing
Defaulting Lenders will be disregarded and excluded and the Pro Rata Shares of
Lenders shall be redetermined, for voting purposes only, to exclude the Pro Rata
Shares of such Defaulting Lenders and PROVIDED, FURTHER, that the Agent must
always be among the Requisite Lenders except that after an Event of Default
described in SECTION 10.1.1 decisions by the Requisite Lenders to accelerate
and/or exercise remedies pursuant to SECTION 10.2.1 shall be made without regard
to whether the Agent is among the Requisite Lenders.
"SECURED BORROWER DEBT" means all Borrower Debt that is secured by a Lien
on any Property.
"SECURITIES" means any stock, shares, voting trust certificates, bonds,
debentures, notes or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments commonly
known as "securities", or any certificates of interest, shares, or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations, PROVIDED that
Securities shall not include Cash Equivalents, Investment Mortgages or interests
in Partnerships.
"SECURITIES ACT" means the Securities Act of 1933, as amended to the date
hereof and from time to time hereafter, and any successor statute.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended to the date hereof and from time to time hereafter, and any successor
statute.
"SENIOR LOANS" has the meaning given to such term in SECTION 11.4.2.
"SOLVENT" means, as to any Person at the time of determination, that such
Person (i) owns property the value of which (both at fair valuation and at
present fair saleable value) is greater than the amount required to pay all of
such Person's liabilities (including contingent liabilities and debts); (ii) is
able to pay all of its debts as such debts mature; and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
"SUBSIDIARY" of a Person means any corporation, Partnership, trust or other
non-Partnership entity of which a majority of the stock (or equivalent ownership
or controlling interest) having voting power to elect a majority of the Board of
Directors (if a corporation) or to select the trustee or equivalent controlling
interest, shall, at the time such reference becomes operative, be directly or
indirectly owned or controlled by such Person.
"TAXES" means all federal, state, local and foreign income and gross
receipts taxes.
"TERMINATION DATE" has the meaning given to such term in SECTION 2.1.4.
"TERMINATION EVENT" means (i) any Reportable Event, (ii) the withdrawal of
a Person, or an ERISA Affiliate from a Benefit Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii)
the occurrence of an obligation arising under Section 4041 of ERISA of a Person
or an ERISA Affiliate to provide affected parties with a written notice of an
intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA, (iv) the institution by the PBGC of proceedings to
terminate any Benefit Plan under Section 4042 of ERISA, (v) any event or
condition which constitutes grounds under Section 4042 of ERISA for the
appointment of a trustee to administer a Benefit Plan, (vi) the partial or
complete withdrawal of such Person or any ERISA Affiliate from a Multiemployer
Plan, or (vii) the adoption of an amendment by any Person or any ERISA Affiliate
to terminate any Benefit Plan.
"TOTAL ASSETS" means Borrower's total assets as shown on its Financial
Statements prepared in accordance with GAAP.
"TOTAL LIABILITIES" means (i) all Indebtedness of Borrower and its
Subsidiaries, whether or not such Indebtedness would be included as a liability
on the balance sheet of Borrower in accordance with GAAP, plus (ii) all other
liabilities of every nature and kind of Borrower and its Subsidiaries that would
be included as liabilities on the balance sheet of Borrower in accordance with
GAAP.
"UNENCUMBERED ASSETS" means, Adjusted Asset Value minus the portion thereof
attributable to assets which are subject to a Lien other than a Permitted Lien.
"UNENCUMBERED PROPERTY" means real property that is wholly-owned by
Borrower or by a Partnership in which the Borrower is the sole general partner,
PROVIDED that such real property is not subject to any Lien (other than
Permitted Liens) or to any agreement (other than this Agreement, any other Loan
Document or the Unsecured Term Note Secured Debt Limitation contained in the
Unsecured Term Note Indenture) that prohibits the creation of any Lien thereon
as security for Indebtedness of the Person owning such real property, including
the Unencumbered Properties listed on SCHEDULE 1, as such Schedule may be
updated from time to time to reflect the acquisition or disposition of Portfolio
Properties and the creation or discharge of Liens on Portfolio Properties.
"UNMATURED EVENT OF DEFAULT" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"UNSECURED TERM NOTE INDENTURE" means the Indenture dated as of January 23,
1996 among the Borrower, the REIT and State Street Bank and Trust Company, as
trustee, as supplemented by First Supplemental Indenture dated as of January 23,
1996 and by Second Supplemental Indenture dated as of October 23, 1996, and as
hereafter amended or further supplemented.
"UNSECURED TERM NOTE SECURED DEBT LIMITATION" means the provision contained
in the Unsecured Term Note Indenture which limits the Borrower's "Secured Debt"
to not more than 40% of its "Adjusted Total Assets" (as such quoted terms are
defined in said Indenture). If the Unsecured Term Note Indenture is amended to
reduce the permitted amount of Secured Borrower Debt this defined term shall
automatically be deemed to incorporate such amendment, but if the Unsecured Term
Note Indenture is amended to increase the permitted amount of Secured Borrower
Debt this definition shall not be deemed to incorporate such amendment until the
same has been approved by the Requisite Lenders.
"UNSECURED TERM NOTES" means, collectively, Borrower's 7 3/4% notes due
2001 issued on January 26, 1996 in the aggregate principal amount of
$100,000,000.00 and Borrower's Remarketed Floating Rate Reset Notes due October
23, 2001 in the aggregate principal amount of $100,000,000.00.
"UNUSED AMOUNT" has the meaning given to such term in SECTION 2.5.1.
"UNUSED FACILITY FEE" has the meaning given to such term in SECTION 2.5.1.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary which is 100% owned by
Borrower.
"WOODBURY COMMON" means the Property owned by Borrower located at the
intersection of NY State Route 32 and the New York State Thruway in the Town of
Woodbury, Orange County, New York, including all expansions and additions
thereto.
1.2 COMPUTATION OF TIME PERIODS. In this Agreement, in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean "to and
including". Periods of days referred to in this Agreement shall be counted in
calendar days unless Business Days are expressly prescribed.
1.3 TERMS.
1.3.1 Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP. All references herein to Borrower, the REIT or any other
Person, in connection with any financial or related covenant, representation or
calculation, shall be understood to mean and refer to Borrower, the REIT and
such other Person on a consolidated basis in accordance with GAAP, unless
otherwise specifically provided and subject in all events to any adjustments
herein set forth.
1.3.2 Any time the phrase "to the best of Borrower's knowledge" or a phrase
similar thereto is used herein, it means: "to the actual knowledge of the then
executive or senior officers of Borrower and the REIT, after reasonable inquiry
of those agents, employees or contractors of the REIT or Borrower who could
reasonably be anticipated to have knowledge with respect to the subject matter
or circumstances in question and after review of those documents or instruments
which could reasonably be anticipated to be relevant to the subject matter or
circumstances in question provided that such reasonable inquiry need not be
undertaken at the time of each Compliance Certificate."
1.3.3 In each case where the consent or approval of Agent, all Lenders
and/or Requisite Lenders is required, or their non-obligatory action is
requested by Borrower, such consent, approval or action shall be in the sole and
absolute discretion of Agent and, as applicable, each Lender, unless otherwise
specifically indicated.
1.3.4 Any time the word "or" is used herein, unless the context otherwise
clearly requires, it has the inclusive meaning represented by the phrase
"and/or". The words "hereof", "herein", "hereby", "hereunder" and similar terms
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Article, section, subsection, clause, exhibit and schedule references
are to this Agreement unless otherwise specified. Any reference in this
Agreement to this Agreement or to any other Loan Document includes any and all
amendments, modifications, supplements, renewals or restatements thereto or
thereof, as applicable.
ARTICLE II
LOANS AND LETTERS OF CREDIT
2.1 LOAN ADVANCES AND REPAYMENT.
2.1.1 MAXIMUM LOAN AMOUNT. Subject to the terms and conditions set forth in
this Agreement, Lenders hereby agree to make Loans to Borrower from time to time
during the period from the Closing Date to the Business Day next preceding the
Termination Date, in an aggregate outstanding principal amount which shall not
exceed the Maximum Loan Amount at any time. All Loans under this Agreement shall
be made by Lenders simultaneously and proportionately to their respective Pro
Rata Shares, it being understood that no Lender shall be responsible for any
failure by any other Lender to perform its obligation to make a Loan hereunder
and that the Commitment of any Lender shall not be increased or decreased as a
result of the failure by any other Lender to perform its obligation to make a
Loan. Loans may be voluntarily prepaid pursuant to SECTION 2.6.1 and, subject to
the provisions of this Agreement, any amounts so prepaid may be reborrowed under
this SECTION 2.1.1. The principal balance of the Loans shall be payable in full
on the Termination Date. The Loans will be evidenced by the Loan Notes.
2.1.2 NOTICE OF BORROWING.
(a) (i) Whenever Borrower desires to borrow under this SECTION 2.1, but in
no event more than three (3) times during any one (1) calendar month, Borrower
shall give Agent, at 115 Perimeter Center Place, N.E., Suite 500, Atlanta, GA
30346, Attn: Lori Y. Litow (Fax No. (770)390-8434) or such other address as
Agent shall designate, an original or facsimile NOTICE OF BORROWING no later
than 9:00 A.M. (Eastern time), not less than three (3) nor more than five (5)
Business Days prior to the proposed Funding Date of each Loan. Each Notice of
Borrowing shall be accompanied by a Compliance Certificate which shall update
the information as of the end of a Fiscal Quarter provided in the Compliance
Certificate most recently delivered pursuant to SECTION 6.1.4 to demonstrate on
a pro forma basis compliance with the covenant set forth in SECTION 9.4 after
the advance of the requested Loan. Such pro forma Compliance Certificate shall
take into account all borrowings and loan repayments, the issuance, expiration
or cancellation of any Letters of Credit and all Property acquisitions and sales
which may have occurred between the end of the last Fiscal Quarter and the
proposed Funding Date. The Agent shall notify each Lender by telephone or
facsimile with regard to each Notice of Borrowing not later than 11:00 A.M.
(Eastern Time) on the second Business Day preceding the proposed Funding Date.
(ii) Notwithstanding the foregoing or any other
provision hereof to the contrary a Notice of Borrowing may be given not
less than two (2) Business Days prior to the proposed Funding Date of a
Loan if the additional Borrowing shall be requested as a Base Rate
Loan.
(iii) Each Notice of Borrowing shall specify (1) the
Funding Date (which shall be a Business Day) in respect of the Loan,
(2) the amount of the proposed Loan, PROVIDED that the aggregate amount
of such proposed Loan shall equal Four Million Dollars ($4,000,000) or
integral multiples of One Million Dollars ($1,000,000) in excess
thereof, (3) whether the Loan to be made thereunder will be a Base Rate
Loan or a LIBOR Loan and, if a LIBOR Loan, the Interest Period, (4) to
which account of Borrower the funds are to be directed, and (5) the
proposed use of such Loan. Any Notice of Borrowing pursuant to this
SECTION 2.1.2 shall be irrevocable.
(b) Borrower may elect (i) to convert LIBOR Loans or any portion thereof
into Base Rate Loans, (ii) to convert Base Rate Loans or any portion thereof to
LIBOR Loans, or (iii) to continue any LIBOR Loans or any portion thereof for an
additional Interest Period, PROVIDED, HOWEVER, that the aggregate amount of the
Loans being converted into or continued as LIBOR Loans shall equal Four Million
Dollars ($4,000,000) or an integral multiple of One Million Dollars ($1,000,000)
in excess thereof. The applicable Interest Period for the continuation of any
LIBOR Loan shall commence on the day on which the next preceding Interest Period
expires. The conversion of a LIBOR Loan to a Base Rate Loan shall only occur on
the last Business Day of the Interest Period relating to such LIBOR Loan; such
conversion shall occur automatically in the absence of an election under CLAUSE
(III) above. Each election under CLAUSE (II) or CLAUSE (III) above shall be made
by Borrower giving Agent an original or facsimile Notice of Borrowing no later
than 9:00 A.M. (Eastern time), not less than three (3) nor more than five (5)
Business Days prior to the date of a conversion to or continuation of a LIBOR
Loan, specifying, in each case (1) the amount of the conversion or continuation,
(2) the Interest Period therefor, and (3) the date of the conversion or
continuation (which date shall be a Business Day).
(c) Upon receipt of a Notice of Borrowing in proper form requesting LIBOR
Loans under SUBPARAGRAPH (A) or (B) above, Agent shall determine the LIBOR
applicable to the Interest Period for such LIBOR Loans, and shall, prior to the
beginning of such Interest Period, give (by facsimile) a FIXED RATE NOTICE in
respect thereof to Borrower and Lenders; PROVIDED, HOWEVER, that failure to give
such notice to Borrower shall not affect the validity of such rate. Each
determination by Agent of the LIBOR shall be conclusive and binding upon the
parties hereto in the absence of manifest error.
2.1.3 MAKING OF LOANS. Subject to SECTION 11.3, Agent shall make the
proceeds of Loans available to Borrower on such Funding Date and shall disburse
such funds in Dollars in immediately available funds to Borrower's commercial
demand account at FNBB or such other account specified in the Notice of
Borrowing acceptable to Agent.
2.1.4. TERM. The outstanding balance of the Loans shall be payable in full
on the earliest to occur of (i) the second anniversary of the Closing Date,
(ii) the acceleration of the Loans pursuant to SECTION 10.2.1, or (iii)
Borrower's written notice to Agent (pursuant to SECTION 2.6.1) of Borrower's
election to prepay all accrued obligations and terminate all Commitments (the
"TERMINATION DATE").
2.2 AUTHORIZATION TO OBTAIN LOANS. Borrower shall provide Agent with
documentation satisfactory to Agent indicating the names of those employees of
Borrower authorized by Borrower to sign Notices of Borrowing and Letter of
Credit Requests, and Agent and Lenders shall be entitled to rely on such
documentation until notified in writing by Borrower of any change(s) of the
persons so authorized. Agent shall be entitled to act on the instructions of
anyone identifying himself or herself as one of the Persons authorized to
execute a Notice of Borrowing or Letter of Credit Request, and Borrower shall be
bound thereby in the same manner as if such Person were actually so authorized.
Borrower agrees to indemnify, defend and hold Lenders and Agent harmless from
and against any and all Liabilities and Costs which may arise or be created by
the acceptance of instructions in any Notice of Borrowing or Letter of Credit
Request, unless caused by the gross negligence of the Person to be indemnified.
2.3 LENDERS' ACCOUNTING. Agent shall maintain a loan account (the "LOAN
ACCOUNT") on its books in which shall be recorded (i) the names and addresses
and the Commitments of Lenders, and principal amount of Loans owing to each
Lender from time to time, and (ii) all advances and repayments of principal and
payments of accrued interest under the Loans, as well as payments of the Unused
Facility Fee, as provided in this Agreement.
2.4 INTEREST ON THE LOANS.
2.4.1 BASE RATE LOANS. Subject to SECTION 2.4.4, all Base Rate Loans shall
bear interest on the average daily unpaid principal amount thereof from the date
made until paid in full at a fluctuating rate per annum equal to the Base Rate.
Base Rate Loans shall be made in minimum amounts of Four Million Dollars
($4,000,000) or an integral multiple of One Million ($1,000,000) in excess
thereof.
2.4.2 LIBOR LOANS. Subject to SECTIONS 2.4.4 and 2.4.8, all LIBOR Loans
shall bear interest on the unpaid principal amount thereof during the Interest
Period applicable thereto at a rate per annum equal to the sum of LIBOR for such
Interest Period PLUS the Applicable LIBOR Rate Margin. LIBOR Loans shall be in
tranches of Four Million Dollars ($4,000,000) or One Million Dollar ($1,000,000)
increments in excess thereof. No more than six (6) LIBOR Loan tranches shall be
outstanding at any one time. Notwithstanding anything to the contrary contained
herein and subject to the Default Interest provisions contained in SECTION
2.4.4, if an Event of Default occurs and as a result thereof the Commitments are
terminated, all LIBOR Loans will convert to Base Rate Loans upon the expiration
of the applicable Interest Periods therefor or the date all Loans become due,
whichever occurs first.
2.4.3 INTEREST PAYMENTS. Subject to SECTION 2.4.4, interest accrued on all
Loans shall be payable by Borrower, in the manner provided in SECTION 2.6.2, in
arrears on the first Business Day of the first calendar month following the
Closing Date, the first Business Day of each succeeding calendar month
thereafter, and on the Termination Date.
2.4.4 DEFAULT INTEREST. Notwithstanding the rates of interest specified in
SECTIONS 2.4.1 and 2.4.2 and the payment dates specified in SECTION 2.4.3,
effective immediately upon the occurrence and during the continuance of any
Event of Default, the principal balance of all Loans then outstanding and, to
the extent permitted by applicable law, any interest payments on the Loans not
paid when due shall bear interest payable upon demand at a rate which is four
percent (4%) per annum in excess of the rate(s) of interest otherwise payable
from time to time under this Agreement. All other amounts due Agent or Lenders
(whether directly or for reimbursement) under this Agreement or any of the other
Loan Documents if not paid when due, or if no time period is expressed, if not
paid within thirty (30) days after demand, shall bear interest from and after
demand at the rate set forth in this SECTION 2.4.4.
2.4.5 LATE FEE. Borrower acknowledges that late payment to Agent will cause
Agent and Lenders to incur costs not contemplated by this Agreement. Such costs
include, without limitation, processing and accounting charges. Therefore, if
Borrower fails timely to pay any sum due and payable hereunder through the
Termination Date, unless waived by Agent pursuant to SECTION 11.11.1 or
Requisite Lenders, a late charge of four cents ($.04) for each dollar of any
principal payment, interest or other charge due hereon and which is not paid
within ten (10) days after such payment is due, shall be charged by Agent (for
the benefit of Lenders) and paid by Borrower for the purpose of defraying the
expense incident to handling such delinquent payment; PROVIDED, HOWEVER, that no
late charges shall be assessed with respect to any period during which Borrower
is obligated to pay interest at the rate specified in SECTION 2.4.4, or in
respect of any failure to pay all Obligations on the Termination Date. Borrower
and Agent agree that this late charge represents a reasonable sum considering
all of the circumstances existing on the date hereof and represents a fair and
reasonable estimate of the costs that Agent and Lenders will incur by reason of
late payment. Borrower and Agent further agree that proof of actual damages
would be costly and inconvenient. Acceptance of any late charge shall not
constitute a waiver of the default with respect to the overdue installment, and
shall not prevent Agent from exercising any of the other rights available
hereunder or any other Loan Document. Such late charge shall be paid without
prejudice to any other rights of Agent.
2.4.6 COMPUTATION OF INTEREST. Interest shall be computed on the basis of
the actual number of days elapsed in the period during which interest or fees
accrue and a year of three hundred sixty (360) days. In computing interest on
any Loan, the date of the making of the Loan shall be included and the date of
payment shall be excluded; PROVIDED, HOWEVER, that if a Loan is repaid on the
same day on which it is made, one (1) day's interest shall be paid on that Loan.
Notwithstanding any provision in this SECTION 2.4, interest in respect of any
Loan shall not exceed the maximum rate permitted by applicable law. Changes in
the Applicable LIBOR Rate Margin shall take effect as of the date on which the
condition set forth in the relevant clause of the definition of each such term
is satisfied.
2.4.7 CHANGES; LEGAL RESTRICTIONS. In the event that after the Closing Date
(i) the adoption of or any change in any law, treaty, rule, regulation,
guideline or determination of a court or Governmental Authority or any change in
the interpretation or application thereof by a court or Governmental Authority,
or (ii) compliance by Agent or any Lender with any request or directive made or
issued after the Closing Date from any central bank or other Governmental
Authority or quasi-governmental authority:
(a) subjects Agent or any Lender to any tax, duty or other charge
of any kind with respect to the Facility, this Agreement or any of the
other Loan Documents or the Loans, or changes the basis of taxation of
payments to Agent or such Lender of principal, fees, interest or any
other amount payable hereunder, except for net income, gross receipts,
gross profits or franchise taxes imposed by any jurisdiction and not
specifically based upon loan transactions (all such non-excepted taxes,
duties and other charges being hereinafter referred to as "LENDER
TAXES");
(b) imposes, modifies or holds applicable, in the determination of
Agent or any Lender, any reserve, special deposit, compulsory loan,
FDIC insurance, capital allocation or similar requirement (other than a
requirement of the type described in SECTION 2.7) against assets held
by, or deposits or other liabilities in or for the account of, advances
or loans by, or other credit extended by, or any other acquisition of
funds by, Agent or such Lender or any applicable lending office; or
(c) imposes on Agent or any Lender any other condition (OTHER THAN
ONE DESCRIBED IN SECTION 2.7) materially more burdensome in nature,
extent or consequence than those in existence as of the Closing Date,
and the result of any of the foregoing is to increase the cost to Agent or
any Lender of making, renewing, maintaining or participating in the Loans or to
reduce any amount receivable thereunder; THEN, in any such case, Borrower shall
promptly pay to Agent or such Lender, as applicable, upon demand, such amount or
amounts (based upon a reasonable allocation thereof by Agent or such Lender to
the financing transactions contemplated by this Agreement and affected by this
SECTION 2.4.7) as may be necessary to compensate Agent or such Lender for any
such additional cost incurred or reduced amounts received; PROVIDED, HOWEVER,
that if the payment of such compensation may not be legally made whether by
modification of the applicable interest rate or otherwise, then Lenders shall
have no further obligation to make Loans that cause Agent or any Lender to incur
such increased cost, and all affected Loans shall become immediately due and
payable by Borrower. Agent or such Lender shall deliver to Borrower and in the
case of a delivery by Lender, such Lender shall also deliver to Agent, a written
statement of the claimed additional costs incurred or reduced amounts received
and the basis therefor as soon as reasonably practicable after such Lender
obtains knowledge thereof. If Agent or any Lender subsequently recovers any
amount of Lender Taxes previously paid by Borrower pursuant to this SECTION
2.4.7, whether before or after termination of this Agreement, then, upon receipt
of good funds with respect to such recovery, Agent or such Lender will refund
such amount to Borrower if no Event of Default or Unmatured Event of Default
then exists or, if an Event of Default or Unmatured Event of Default then
exists, such amount will be credited to the Obligations in the manner determined
by Agent or such Lender.
2.4.8 CERTAIN PROVISIONS REGARDING LIBOR LOANS.
(a) LIBOR LENDING UNLAWFUL. If any Lender shall determine (which
determination shall, upon notice thereof to Borrower and Agent, be
conclusive and binding on the parties hereto) that the introduction of
or any change in or in the interpretation of any law makes it unlawful,
or any central bank or other Governmental Authority asserts that it is
unlawful, for such Lender to make or maintain any Loan as a LIBOR Loan,
(i) the obligations of such Lenders to make or maintain any Loans as
LIBOR Loans shall, upon such determination, forthwith be suspended
until such Lender shall notify Agent that the circumstances causing
such suspension no longer exist, and (ii) if required by such law or
assertion, the LIBOR Loans of such Lender shall automatically convert
into Base Rate Loans in which case no Fixed Rate Prepayment Fee shall
be due upon such conversion.
(b) DEPOSITS UNAVAILABLE. If Agent shall have determined in good
faith that adequate means do not exist for ascertaining the interest
rate applicable hereunder to LIBOR Loans, then, upon notice from Agent
to Borrower the obligations of all Lenders to make or maintain Loans as
LIBOR Loans shall forthwith be suspended until Agent shall notify
Borrower that the circumstances causing such suspension no longer
exist. Agent will give such notice when it determines, in good faith,
that such circumstances no longer exist; PROVIDED, HOWEVER, that Agent
shall not have any liability to any Person with respect to any delay in
giving such notice.
(c) FIXED RATE PREPAYMENT FEE. Borrower acknowledges that
prepayment or acceleration of a LIBOR Loan during an Interest Period
shall result in Lenders incurring additional costs, expenses and/or
liabilities and that it is extremely difficult and impractical to
ascertain the extent of such costs, expenses and/or liabilities. (For
all purposes of this subparagraph (c), any Loan not being made as a
LIBOR Loan in accordance with the Notice of Borrowing therefor, as a
result of Borrower's cancellation thereof, shall be treated as if such
LIBOR Loan had been prepaid.) Therefore, on the date a LIBOR Loan is
prepaid or the date all sums payable hereunder become due and payable,
by acceleration or otherwise ("PREPAYMENT DATE"), Borrower will pay to
Agent, for the account of each Lender, (in addition to all other sums
then owing), an amount ("FIXED RATE PREPAYMENT FEE") determined by the
Agent to be the amount, if any, by which (i) the amount of interest
which would have accrued on the prepaid LIBOR Loan for the remainder of
the Interest Period at the rate applicable to such LIBOR Loan exceeds
(ii) the amount of interest that would accrue on a LIBOR Loan in the
same amount for the same period if LIBOR were set on the Prepayment
Date.
(d) Upon the written notice to Borrower from Agent, Borrower shall
immediately pay to Agent, for the account of Lenders, the Fixed Rate
Prepayment Fee. Such written notice (which shall include calculations
in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the parties hereto.
(e) Borrower understands, agrees and acknowledges the following:
(i) no Lender has any obligation to purchase, sell and/or match funds
in connection with the use of LIBOR as a basis for calculating the rate
of interest on a LIBOR Loan; (ii) LIBOR is used merely as a reference
in determining such rate; and (iii) Borrower has accepted LIBOR as a
reasonable and fair basis for calculating such rate and a Fixed Rate
Prepayment Fee. Borrower further agrees to pay the Fixed Rate
Prepayment Fee and Lender Taxes, if any, whether or not a Lender elects
to purchase, sell and/or match funds.
2.4.9 WITHHOLDING TAX EXEMPTION. At least five (5) Business Days prior to
the first day on which interest or fees are payable hereunder for the account of
any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to Agent and
Borrower two (2) duly completed copies of United States Internal Revenue Service
Form 1001 or Form 4224, certifying in either case that such Lender is entitled
to receive payments under this Agreement without deduction or withholding of any
United States federal income taxes. Each Lender which so delivers a Form 1001 or
Form 4224 further undertakes to deliver to Agent and Borrower two (2) additional
copies of such form (or any applicable successor form) on or before the date
that such form expires (currently, three (3) successive calendar years for Form
1001 and one (1) calendar year for Form 4224) or becomes obsolete or after the
occurrence of any event requiring a change in the most recent forms so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Agent or Borrower, in each case certifying that such
Lender is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender advises Agent that it is not capable of receiving payments without
any deduction or withholding of United States federal income taxes. If any
Lender cannot deliver such form, then Borrower may withhold from such payments
such amounts as are required by the Internal Revenue Code.
2.5 FEES.
2.5.1 UNUSED FACILITY FEE. From and after the Closing Date and until the
Obligations are paid in full and this Agreement is terminated or, if sooner, the
date the Commitments terminate, and subject to SECTION 11.4.2, Borrower shall
pay to Agent, for the account of each Lender, a fee equal to one-quarter percent
(0.25%) of an amount equal to (i) the amount of the Facility MINUS (ii) the
average daily principal balance of all Loans MINUS (iii) the average daily face
amount of Letters of Credit outstanding hereunder (said difference being the
"UNUSED AMOUNT"), as determined for each Fiscal Quarter. The aforesaid fee (the
"UNUSED FACILITY FEE") shall be payable, in the manner provided in SECTION
2.6.2, in arrears on the first Business Day in each Fiscal Quarter, beginning
with the first Fiscal Quarter after the Closing Date, and on the date of payment
in full of all obligations to Lenders pursuant to SECTION 2.1.4 with the Unused
Facility Fee to be prorated to the date of such payment in such case.
2.5.2 AGENCY FEES. Borrower shall pay Agent such fees as are provided for
in the agreement regarding fees between Agent and Borrower, as in existence from
time to time.
2.5.3 PAYMENT OF FEES. The fees described in SECTION 4.1.11 and this
SECTION 2.5 represent compensation for services rendered and to be rendered
separate and apart from the lending of money or the provision of credit and do
not constitute compensation for the use, detention or forbearance of money, and
the obligation of Borrower to pay the fees described herein shall be in addition
to, and not in lieu of, the obligation of Borrower to pay interest, other fees
and expenses otherwise described in this Agreement. All fees shall be payable
when due in immediately available funds and shall be non-refundable when paid.
If Borrower fails to make any payment of fees or expenses specified or referred
to in this Agreement due to Agent or Lenders, including without limitation those
referred to in this SECTION 2.5, in SECTION 12.1, or otherwise under this
Agreement or any separate fee agreement between Borrower and Agent or any Lender
relating to this Agreement, when due, the amount due shall bear interest until
paid at the Base Rate and, after ten (10) days at the rate specified in SECTION
2.4.4 (but not to exceed the maximum rate permitted by applicable law), and
shall constitute part of the Obligations. The Unused Facility Fee and the fees
referred to in SECTION 2.5.2 which are expressed as a per annum charge shall be
calculated on the basis of the actual number of days elapsed in a three hundred
sixty (360) day year.
2.6 PAYMENTS.
2.6.1 VOLUNTARY PREPAYMENTS. Borrower may, upon not less than three (3)
Business Days prior written notice to Agent not later than 11:00 A.M. (Eastern
time) on the date given, at any time and from time to time, prepay any Loans in
whole or in part. Any notice of prepayment given to Agent under this SECTION
2.6.1 shall specify the date of prepayment and the principal amount of the
prepayment. In the event of a prepayment of LIBOR Loans, Borrower shall
concurrently pay any Fixed Rate Prepayment Fee payable in respect thereof. Agent
shall provide to each Lender a confirming copy of such notice on the same
Business Day such notice is received.
2.6.2 MANNER AND TIME OF PAYMENT. All payments of principal, interest and
fees hereunder payable to Agent or the Lenders shall be made without condition
or reservation of right and free of set-off or counterclaim, in Dollars and by
wire transfer (pursuant to Agent's written wire transfer instructions) of
immediately available funds, to Agent, for the account of each Lender, not later
than 11:00 A.M. (Eastern time) on the date due; and funds received by Agent
after that time and date shall be deemed to have been paid on the next
succeeding Business Day.
2.6.3 PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be made by
Borrower hereunder shall be stated to be due on a day which is not a Business
Day, payments shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder and of any of the fees specified in SECTION 2.5, as the case
may be.
2.7 INCREASED CAPITAL. If either (i) the introduction of or any change in
or in the interpretation of any law or regulation or (ii) compliance by Agent or
any Lender with any guideline or request from any central bank or other
Governmental Authority made or issued after the Closing Date affects or would
affect the amount of capital required or expected to be maintained by Agent or
such Lender or any corporation controlling Agent or such Lender, and Agent or
such Lender determines that the amount of such capital is increased by or based
upon the existence of Agent's obligations hereunder or such Lender's Commitment,
then, upon demand by Agent or such Lender, Borrower shall immediately pay to
Agent or such Lender, from time to time as specified by Agent or such Lender,
additional amounts sufficient to compensate Agent or such Lender in the light of
such circumstances, to the extent that Agent or such Lender determines such
increase in capital to be allocable to the existence of Agent's obligations
hereunder or such Lender's Commitment. A certificate as to such amounts
submitted to Borrower by Agent or such Lender shall, in the absence of manifest
error, be conclusive and binding for all purposes.
2.8 NOTICE OF INCREASED COSTS. Each Lender agrees that, as promptly as
reasonably practicable after it becomes aware of the occurrence of an event or
the existence of a condition which would cause it to be affected by any of the
events or conditions described in SECTION 2.4.7 or 2.4.8 or SECTION 2.7, it will
notify Borrower, and provide a copy of such notice to Agent, of such event and
the possible effects thereof, PROVIDED that the failure to provide such notice
shall not affect Lender's rights to reimbursement provided for herein.
2.9 LETTERS OF CREDIT
2.9.1 TERMS OF LETTERS OF CREDIT. Up to $20,000,000 of the Facility may be
used by Borrower for the issuance of Letters of Credit by the Agent for the
account of the Borrower subject to the terms and conditions set forth herein.
Each Letter of Credit shall be denominated in dollars and shall be a standby
letter of credit issued to support the obligations of Borrower (i) in connection
with the development of a Construction Project, or (ii) to advance loans to
Foreign Affiliates, or to make other forms of Foreign Investment, provided that
upon the issuance of a Letter of Credit for the purpose set forth in this clause
(ii) the face amount thereof shall be added to the amount of Foreign Investments
as of the time of issuance when determining compliance with SECTION 9.10. Each
Letter of Credit shall have an initial term of not more than one (1) year, and
shall expire no later than five (5) Business Days prior to the Termination Date.
Although the Agent shall be the issuing bank of the Letter of Credit, each
Lender hereby accepts for its own account and risk an undivided interest equal
to its Pro Rata Share in the Agent's obligations and rights under each Letter of
Credit issued hereunder. Each Lender unconditionally and irrevocably agrees with
the Agent that, if a draft is paid under any Letter of Credit, such Lender shall
promptly pay to the Agent an amount equal to such Lender's Pro Rata Share of the
amount of such draft or any part thereof. Upon the issuance of each Letter of
Credit hereunder, there shall be reserved from each Bank's Commitment an amount
equal to such Lender's Pro Rata Share of the face amount of the Letter of
Credit. Such reserved amounts shall remain in place and shall be unavailable for
borrowing under SECTION 2.1 until the date that the Letter of Credit expires, is
fully drawn or is terminated.
2.9.2 LETTER OF CREDIT REQUEST. The Borrower shall give to the Agent a
written notice in the form of EXHIBIT H hereto of each Letter of Credit
requested hereunder (a "LETTER OF CREDIT REQUEST") no less than six (6) Business
Days prior to the proposed Issuance Date of the requested Letter of Credit,
provided that Agent may, in its sole discretion, reduce said 6 Business Day
period to not less than 3 Business Days. Each Letter of Credit Request shall
specify (i) the name and address of the beneficiary of the requested Letter of
Credit, (ii) the face amount of the requested Letter of Credit, (iii) the
proposed Issuance Date and expiration date of the requested Letter of Credit,
(iv) the proposed form of the requested Letter of Credit, and (v) the permitted
purpose for which the Letter of Credit will be used, and shall be accompanied by
a Compliance Certificate demonstrating on a pro forma basis compliance with the
covenant set forth in SECTION 9.4 after issuance of the requested Letter of
Credit. Such pro forma Compliance Certificate shall take into account all
borrowings and loan repayments, the issuance, expiration or cancellation of
Letters of Credit (including the requested Letter of Credit), and all Property
acquisitions and sales which may have occurred between the end of the last
Fiscal Quarter and the proposed Issuance Date. The Agent may also require that
the Borrower complete its standard letter of credit application form and submit
the same together with the Letter of Credit Request. The Agent shall provide a
copy of the Letter of Credit Request to the Lenders at least two (2) Business
Days before the Issuance Date of the Letter of Credit. If the issuance of the
requested Letter of Credit will not cause the outstanding principal of the Loans
to exceed the Maximum Loan Amount and the Agent determines, in its discretion,
that it is willing to issue the requested Letter of Credit, and that it is
satisfied with the proposed form thereof, the Letter of Credit shall be issued
by the Agent and each of the Lenders shall then be obligated to the Agent with
respect to its Pro Rata Share of the Letter of Credit as provided above in
SECTION 2.9.1.
2.9.3 LETTER OF CREDIT FEES. On or before the Issuance Date of any
requested Letters of Credit, the Borrower shall pay to the Agent for its own
account an issuance fee equal to one-quarter percent (.25%) of the face amount
of the Letter of Credit. On or before the date of any renewal or extension of a
Letter of Credit, the Borrower shall pay to the Agent for its own account a
renewal fee equal to one-eighth percent (.125%) of the face amount of the Letter
of Credit. The Borrower shall pay to the Agent for the account of the Lenders a
Letter of Credit fee equal to one and three-quarter percent (1.75%) per annum of
the face amount of the Letter of Credit, which Letter of Credit fee shall be due
and payable on the Issuance Date of the Letter of Credit and on the date of each
renewal or extension thereof, and shall be prorated for any partial year based
on a 360-day year and paid for the actual number of days elapsed. Promptly after
its receipt thereof the Agent shall distribute such Letter of Credit fee to the
Lenders in accordance with their respective Pro Rata Shares. Such fees shall be
nonrefundable and shall not be further prorated in the event that the Letter of
Credit terminates prior to its scheduled expiration date. The Borrower also
agrees to reimburse the Agent for all reasonable fees, costs, expenses and
disbursements of the Agent in issuing, effecting payment under, amending or
otherwise administering any Letter of Credit.
2.9.4 DRAWING. Promptly after each Drawing Date the Agent shall notify the
Lenders and the Borrower of the amount of the draft paid by the Agent on such
Drawing Date. The payment of a draft under a Letter of Credit shall constitute
an advance of a Loan which shall bear interest as a Base Rate Loan from the
Drawing Date. On the Drawing Date each Lender shall pay to the Agent its Pro
Rata Share of the amount of the draft under the Letter of Credit so paid. If the
Agent receives such payment from any Lender on a date after the Drawing Date,
such Lender shall pay to the Agent on demand interest on said amount at the
Federal Funds Rate. Each Bank's obligation to pay its Pro Rata Share of each
draft under a Letter of Credit shall not be subject to the satisfaction of any
conditions set forth in this Agreement and shall not depend on whether there may
then be an Event of Default or an Unmatured Event of Default. Within three (3)
Business Days after each Drawing Date, the Borrower shall deliver to the Agent a
written explanation of the facts and circumstances relating to such drawing and
a Compliance Certificate and any other information requested by the Agent for
the purpose of allowing the Lenders to determine whether the drawing or related
events have resulted in an Event of Default. The Agent shall promptly provide
copies of such explanation and information to the Lenders.
2.9.5 BORROWER'S OBLIGATIONS REGARDING LETTERS OF CREDIT. The Borrower's
obligations under this SECTION 2.9 shall be absolute and unconditional under any
and all circumstances and irrespective of any set-off, counterclaim or defense
to payment which the Borrower may have or have had against the Agent, any Lender
or any beneficiary of a Letter of Credit. The Borrower also agrees that the
Agent shall not be responsible for, and the Borrower's reimbursement obligations
hereunder shall not be affected by, among other things, (i) the validity or
genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any
dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
(iii) any claims whatsoever of the Borrower against any beneficiary of such
Letter of Credit or any such transferee. The Agent shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors, omissions, interruptions or delays caused by the
Agent's gross negligence or willful misconduct. The Borrower agrees that any
action taken or omitted by the Agent under or in connection with any Letter of
Credit or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards of care
specified in the Uniform Customs and Practices for Documentary Credits as the
same may be amended from time to time, shall be binding on the Borrower and
shall not result in any liability of the Agent to the Borrower.
2.10 INCREASE IN FACILITY. The Facility may be increased by up to
$100,000,000.00 in the aggregate with the approval of the Agent and all Lenders.
If the Borrower desires such an increase it shall notify the Agent and if the
Agent agrees to such increase the Borrower and the Agent shall separately agree
with respect to any fees payable by the Borrower in connection therewith. The
Agent shall notify the Lenders and within thirty (30) days thereafter each
Lender shall notify the Agent whether it approves the increase and, if so,
whether it desires to increase its Commitment in connection therewith. Any
Lender which fails to approve the requested increase shall be deemed to grant
the Agent the right to acquire such Lender's rights and interests hereunder by
assignment pursuant to SECTION 11.12 for consideration equal to the outstanding
balance of Loans owed to such Lender. If all Lenders approve such increase or if
Agent elects to exercise such right to acquire the interest of all Lenders which
did not approve the increase, this Agreement shall be amended to reflect such
increase and to adjust the Pro Rata Shares of all Lenders. The allocation of the
increase among the Agent, the existing Lenders and any new Lenders to become
parties hereto as assignees of Agent shall be made by Agent, provided that such
allocations shall be made so that each of the original Lenders which notified
Agent of its desire to increase its Commitment is allowed to increase its
Commitment up to the amount of Agent's intended hold level following such
increase in the Facility. The Agent may (but shall not be obligated to) assign
all or any portion of such increase in its Commitment pursuant to SECTION 11.12
either simultaneously with such increase or at any time thereafter. Effective
upon the date of such amendment each Lender whose Pro Rata Share is increasing
shall advance funds in an amount necessary to increase the outstanding principal
amount of Loans owed to such Lender to equal its revised Pro Rata Share of all
outstanding Loans and the Agent shall distribute such funds so advanced to the
Lenders whose Pro Rata Shares are decreasing such that the outstanding principal
balance of Loans owed to each such Lender shall be equal to such Lender's
revised Pro Rata Share of all Loans outstanding hereunder. On the effective date
of such amendment the Borrower shall execute and deliver to any Lender whose
Commitment is increasing, including the Agent or its assignees, new Loan Notes
in the aggregate amount of such increase and shall provide such certificates,
legal opinions and other documents as may be required by the Agent in connection
therewith.
ARTICLE III
PORTFOLIO PROPERTIES
3.1 UPDATED LISTS OF UNENCUMBERED PROPERTIES AND PORTFOLIO PROPERTIES.
SCHEDULE 1 contains a list of the Unencumbered Properties and SCHEDULE 1.1 sets
forth a list of the Portfolio Properties (other than the Unencumbered
Properties) each as of the date hereof. Promptly upon the acquisition or
disposition of any of the Portfolio Properties and promptly upon the creation of
any Lien or other event which causes any of the Portfolio Properties which
previously qualified as an Unencumbered Property to no longer satisfy the
definition of Unencumbered Property, Borrower shall deliver to Agent an updated
SCHEDULE 1 and/or SCHEDULE 1.1 and any other information as may be reasonably
requested by Agent relating to such change in the list of Unencumbered
Properties and/or Portfolio Properties, including a Compliance Certificate.
ARTICLE IV
EFFECTIVE DATE; CONDITIONS TO LOANS
4.1 EFFECTIVE DATE. This Amended and Restated Credit Agreement shall become
effective as an amendment and restatement of the Original Credit Agreement, and
the interest rate applicable to the Loans shall decrease based on the modified
definition of Applicable LIBOR Rate Margin set forth herein as of the Effective
Date provided that each of the following conditions precedent is satisfied:
4.1.1 BORROWER DOCUMENTS. Borrower shall have executed and/or delivered to
Agent each of the following, in form and substance acceptable to Agent and each
other Lender:
(a) This Agreement;
(b) A Certificate stating that
Borrower's Limited
Partnership Agreement, as
amended and Borrower's
Certificate of Limited
Partnership filed with the
Delaware Secretary of State,
certified copies of which
were delivered to Agent on
the Closing Date, have not
been further amended and are
in effect;
(c) Good Standing Certificate for Borrower from the
Secretary of State of Delaware.
4.1.2 REIT DOCUMENTS. The REIT shall have executed and/or delivered to
Agent each of the following, in form and substance acceptable to Agent and each
other Lender:
(a) A Ratification of the Guaranty
(b) Good Standing Certificate for the REIT from the
Secretary of State of Maryland;
(c) Certificate of Secretary
regarding corporate
resolutions of the REIT, and
the incumbency of its
officers and certifying
copies of all further
amendments to the REIT's
Articles of Incorporation and
By-laws since the certified
copies delivered to Agent on
the Closing Date as certified
by the Secretary of the REIT;
4.1.3 COMPLIANCE CERTIFICATE. Borrower shall have delivered to Agent a
Compliance Certificate demonstrating compliance with the financial covenants in
ARTICLE IX after the Effective Date.
4.1.4 MATERIAL ADVERSE CHANGES. No change, as determined by Agent shall
have occurred, during the period commencing December 31, 1995, and ending on the
Effective Date, which has a Material Adverse Effect on Borrower or the REIT.
4.1.5 LITIGATION PROCEEDINGS. There shall not have been instituted or
threatened, during the period commencing December 31, 1995, and ending on the
Effective Date, any litigation or proceeding in any court or Governmental
Authority affecting or threatening to affect Borrower or the REIT which has a
Material Adverse Effect, as reasonably determined by Agent.
4.1.6 NO EVENT OF DEFAULT; SATISFACTION OF FINANCIAL COVENANTS. On the
Effective Date, no Event of Default or Unmatured Event of Default shall exist
and all of the financial covenants contained in ARTICLE IX shall be satisfied.
4.1.7 FEES. All expenses of Agent incurred prior to such Effective Date in
connection with this Agreement (including without limitation all attorneys' fees
and costs), shall have been paid by Borrower.
4.1.8 OPINION OF COUNSEL. Agent shall have received, on behalf of Agent and
Lenders, favorable opinions of counsel for Borrower and the REIT dated as of the
Effective Date, in form and substance satisfactory to Agent.
4.1.9 REPRESENTATIONS AND WARRANTIES. All representations and warranties
contained in this Agreement and the other Loan Documents shall be true and
correct in all material respects.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT. The obligation
of each Lender to make any Loan requested to be made by it and the obligation of
the Agent to issue any Letter of Credit requested by Borrower, on any date, is
subject to satisfaction of the following conditions precedent as of such date:
4.2.1 DOCUMENTS. With respect to a request for a Loan, Agent shall have
received, on or before the Funding Date and in accordance with the provisions of
SECTION 2.1.2, an original and duly executed Notice of Borrowing. With respect
to a request for a Letter of Credit, Agent shall have received, on or before the
Issuance Date and in accordance with the provisions of SECTION 2.9.2 an original
and duly executed Letter of Credit Request.
4.2.2 ADDITIONAL MATTERS. As of the Funding Date for any Loan and after
giving effect to the Loans being requested and as of the Issuance Date of any
Letter of Credit after giving effect to the issuance of the requested Letter of
Credit:
(a) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties contained in this Agreement and in any other Loan Document
(other than representations and warranties which expressly speak only
as of a different date and other than for changes permitted or
contemplated by this Agreement) shall be true and correct in all
material respects on and as of such Funding Date or such Issuance Date,
as though made on and as of such date;
(b) NO DEFAULT. No Event of Default or Unmatured Event of Default
shall have occurred and be continuing or would result from the making
of the requested Loan or the issuance of the requested Letter of
Credit, and all of the financial covenants contained in ARTICLE IX
shall be satisfied; and
(c) NO MATERIAL ADVERSE CHANGE. Since the Closing Date, no change
shall have occurred which shall have a Material Adverse Effect on
Borrower or REIT, as determined by Agent, other than any such change
the occurrence of which has been waived by Requisite Lenders in
connection with any prior Borrowing.
Each submission by Borrower to Agent of a Notice of Borrowing with respect to a
Loan and the acceptance by Borrower of the proceeds of each such Loan made
hereunder and each submission by Borrower to Agent of a Letter of Credit Request
shall constitute a representation and warranty by Borrower as of the Funding
Date in respect of such Loan that all the conditions contained in this SECTION
4.2.2 have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to make the Loans and issue the Letters of Credit,
Borrower hereby represents and warrants to Lenders as follows:
5.1 BORROWER ORGANIZATION; PARTNERSHIP POWERS. Borrower (i) is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware, (ii) is duly qualified to do business as a foreign
limited partnership and in good standing under the laws of each jurisdiction in
which any Portfolio Property is located or in which Borrower owns or leases real
property or in which the nature of its business requires it to be so qualified,
except for those jurisdictions where failure to so qualify and be in good
standing would not have a Material Adverse Effect on Borrower, and (iii) has all
requisite partnership power and authority to own and operate its property and
assets and to conduct its business as presently conducted.
5.2 BORROWER AUTHORITY. Borrower has the requisite partnership power and
authority to execute, deliver and perform each of the Loan Documents to which it
is or will be a party. The execution, delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly approved
by the general partner of Borrower, and no other partnership proceedings or
authorizations on the part of Borrower or its general or limited partners are
necessary to consummate such transactions. Each of the Loan Documents to which
Borrower is a party has been duly executed and delivered by Borrower and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency and other laws
affecting creditors' rights generally.
5.3 REIT ORGANIZATION; CORPORATE POWERS. The REIT (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, (ii) is duly qualified to do business as a foreign corporation and in
good standing under the laws of each jurisdiction in which any Portfolio
Property is located or in which Borrower or the REIT owns or leases real
property or in which the nature of its business requires it to be so qualified,
except for those jurisdictions where failure to so qualify and be in good
standing would not have a Material Adverse Effect on the REIT, and (iii) has all
requisite corporate power and authority to own and operate its property and
assets, to perform its duties as general partner of Borrower and to conduct its
business as presently conducted.
5.4 REIT AUTHORITY. The REIT has the requisite corporate power and
authority to execute, deliver and perform the Guaranty and, in its capacity as
general partner of the Borrower each of the other Loan Documents. The execution,
delivery and performance thereof, and the consummation of the transactions
contemplated thereby, have been duly approved by the Board of Directors of the
REIT, and no other corporate proceedings on the part of the REIT are necessary
to consummate such transactions. Each of the Loan Documents to which the REIT is
a party has been duly executed and delivered by Borrower and constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms, subject to bankruptcy, insolvency and other laws affecting creditors'
rights generally.
5.5 OWNERSHIP OF BORROWER, EACH SUBSIDIARY AND PARTNERSHIP. SCHEDULE 5.5
sets forth the general partners and limited partners (or other holders of
ownership interests) of each Subsidiary, Majority Partnership or GP Partnership
and their respective ownership percentages and there are no other partnership
(or other ownership) interests outstanding. Except as set forth or referred to
in the Partnership Agreement of any Majority Partnership or GP Partnership, no
partnership (or other ownership) interest (or any securities, instruments,
warrants, option or purchase rights, conversion or exchange rights, calls,
commitments or claims of any character convertible into or exercisable for such
interests) of any such Person is subject to issuance under any security,
instrument, warrant, option or purchase rights, conversion or exchange rights,
call, commitment or claim of any right, title or interest therein or thereto.
All of the partnership (or other ownership) interests in Borrower and each
Majority Partnership or GP Partnership and all of the stock of each subsidiary
have been issued in compliance with all applicable Requirements of Law.
5.6 NO CONFLICT. The execution, delivery and performance by Borrower of the
Loan Documents to which it is or will be a party, and each of the transactions
contemplated thereby, do not and will not (i) conflict with or violate
Borrower's limited partnership agreement or certificate of limited partnership
or other organizational documents or the REIT's articles of incorporation,
by-laws or other organizational documents, as the case may be, or (ii) conflict
with, result in a breach of or constitute (with or without notice or lapse of
time or both) a default under any Requirement of Law, Contractual Obligation or
Court Order of or binding upon Borrower or the REIT, or (iii) require
termination of any Contractual Obligation, or (iv) result in or require the
creation or imposition of any Lien whatsoever upon any of the Portfolio
Properties or assets of Borrower, other than Permitted Liens or Liens created by
the Loan Documents.
5.7 CONSENTS AND AUTHORIZATIONS. Each of Borrower and the REIT has obtained
all consents and authorizations required pursuant to its Contractual Obligations
with any other Person, and shall have obtained all consents and authorizations
of, and effected all notices to and filings with, any Governmental Authority, as
may be necessary to allow Borrower and the REIT to lawfully execute, deliver and
perform the Loan Documents.
5.8 GOVERNMENTAL REGULATION. Neither Borrower, the REIT nor any Partnership
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act, the Investment Company Act
of 1940 or any other federal or state statute or regulation such that its
ability to incur indebtedness is limited or its ability to consummate the
transactions contemplated by the Loan Documents is materially impaired.
5.9 PRIOR FINANCIALS. The December 31, 1995 Consolidated Balance Sheet,
Statement of operations and Statement of Cash Flows of (i) the REIT contained in
the REIT's Form 10K and (ii) the Borrower contained in the Borrower's Form 10K
(the "DECEMBER 31, 1995 FINANCIALS") delivered to Agent prior to the date hereof
were prepared in accordance with GAAP and fairly present the assets, liabilities
and financial condition of the REIT on a consolidated basis, at such date and
the results of its operations and its cash flows, on a consolidated basis, for
the period then ended.
5.10 PROJECTIONS AND FORECASTS. Each of the projections and forecasts
delivered to Agent prior to the date hereof (1) has been prepared by Borrower in
light of the past business and performance of Borrower on a consolidated basis
and (2) represent as of the date thereof, the reasonable good faith estimates of
Borrower's financial personnel.
5.11 PRIOR OPERATING STATEMENTS. Each of the consolidating operating
statements pertaining to the Portfolio Properties delivered to Agent prior to
the date hereof was prepared in accordance with GAAP in effect on the date such
operating statement of each Portfolio Property was prepared and fairly presents
the results of operations of such Portfolio Property for the period then ended.
5.12 QUARTERLY OPERATING REPORTS. The Quarterly Operating Report for the
Fiscal Quarter ended September 30, 1996 attached hereto as EXHIBIT C (i) has
been prepared in accordance with the books and records of the Portfolio
Properties, and (ii) fairly presents the results of operations of the Portfolio
Properties for the period then ended. All of the information on EXHIBIT C
regarding Construction Projects (1) has been prepared based on the best
available information regarding such Construction Projects and (2) represents
the reasonable good faith estimates of the REIT's financial personnel.
5.13 LITIGATION; ADVERSE EFFECTS.
(a) There is no action, suit, Proceeding, governmental
investigation or arbitration, at law or in equity, or before or by any
Governmental Authority, pending or, to the best of Borrower's
knowledge, threatened against Borrower, the REIT or any Portfolio
Property, which, if adversely determined, would (i) result in a
Material Adverse Effect on Borrower or the REIT, (ii) materially and
adversely affect the ability of any party to any of the Loan Documents
to perform its obligations thereunder, or (iii) materially and
adversely affect the ability of Borrower to perform its obligations
contemplated in the Loan Documents.
(b) Neither Borrower nor the REIT is (i) in violation of any
applicable law, which violation has a Material Adverse Effect on
Borrower or the REIT, or (ii) in default with respect to any Court
Order.
5.14 NO MATERIAL ADVERSE CHANGE. Since December 31, 1995, there has
occurred no event which has a Material Adverse Effect on Borrower or the REIT,
and no material adverse change in Borrower's ability to perform its obligations
under the Loan Documents to which it is a party or the transactions contemplated
thereby.
5.15 PAYMENT OF TAXES. All tax returns and reports to be filed by Borrower
and the REIT have been timely filed, and all taxes, assessments, fees and other
governmental charges shown on such returns or otherwise payable by Borrower have
been paid when due and payable (other than real property taxes, which may be
paid prior to delinquency so long as no penalty or interest shall attach
thereto), except such taxes, if any, as are reserved against in accordance with
GAAP and are being contested in good faith by appropriate proceedings or such
taxes, the failure to make payment of which when due and payable will not have,
in the aggregate, a Material Adverse Effect on Borrower or the REIT. Borrower
has no knowledge of any proposed tax assessment against Borrower or the REIT
that will have a Material Adverse Effect on Borrower or the REIT.
5.16 MATERIAL ADVERSE AGREEMENTS. Neither the Borrower nor the REIT is a
party to or subject to any Contractual Obligation or other restriction contained
in the Borrower's limited partnership agreement or certificate of limited
partnership, the REIT's Articles of Incorporation or bylaws or similar governing
documents which has a Material Adverse Effect on Borrower or the ability of
Borrower to perform its obligations under the Loan Documents.
5.17 PERFORMANCE. Neither Borrower nor the REIT is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation applicable to it, and no
condition exists which, with the giving of notice or the lapse of time or both,
would constitute a default under such Contractual Obligation in each case,
except where the consequences, direct or indirect, of such default or defaults,
if any, will not have a Material Adverse Effect on Borrower or the REIT.
5.18 FEDERAL RESERVE REGULATIONS. No part of the proceeds of the Loan
hereunder will be used to purchase or carry any "margin security" as defined in
Regulation G or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any margin security or for any
other purpose which might constitute this transaction a "purpose credit" within
the meaning of said Regulation G. Neither Borrower nor the REIT is engaged
primarily in the business of extending credit for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U. No part of the proceeds
of the Loan hereunder will be used for any purpose that violates, or which is
inconsistent with, the provisions of Regulation X or any other regulation of the
Federal Reserve Board.
5.19 UNSECURED TERM NOTES. The Unsecured Term Notes were issued in
compliance with all applicable Requirements of Law and there is no existing
"Event of Default" as defined in the Unsecured Term Note Indenture.
5.20 REQUIREMENTS OF LAW. Borrower and the REIT are in compliance with all
Requirements of Law (including without limitation the Securities Act and the
Securities Exchange Act, and the applicable rules and regulations thereunder,
state securities law and "Blue Sky" laws) applicable to it and its respective
businesses, in each case, where the failure to so comply will have a Material
Adverse Effect on any such Person. The REIT has made all filings with and
obtained all consents of the Commission required under the Securities Act and
the Securities Exchange Act in connection with the execution, delivery and
performance by the REIT of the Loan Documents.
5.21 PATENTS, TRADEMARKS, PERMITS, ETC. Borrower and the REIT own, are
licensed or otherwise have the lawful right to use, or have all permits and
other governmental approvals, patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of each
such Person's business as currently conducted, the absence of which would have a
Material Adverse Effect upon such Person. The use of such permits and other
governmental approvals, patents, trademarks, trade names, copyrights,
technology, know-how and processes by each such Person does not infringe on the
rights of any Person, subject to such claims and infringements as do not, in the
aggregate, give rise to any liability on the part of any such Person which would
have a Material Adverse Effect on any such Person.
5.22 ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE 5.22, to the
best of Borrower's knowledge, (i) the operations of Borrower and its
Subsidiaries and Partnerships comply in all material respects with all
applicable local, state and federal environmental, health and safety
Requirements of Law ("ENVIRONMENTAL LAWS"); (ii) none of the Portfolio
Properties are subject to any Remedial Action or other Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment in violation of any Environmental Laws; (iii) neither Borrower, the
REIT nor any Partnership or Subsidiary has filed any notice under applicable
Environmental Laws reporting a Release of a Contaminant into the environment in
violation of any Environmental Laws, except as the same may have been heretofore
remedied; (iv) there is not now on or in any of the Portfolio Properties (except
in compliance in all material respects with all applicable Environmental Laws):
(A) any underground storage tanks, (B) any asbestos-containing material, or (C)
any polychlorinated biphenyls (PCB's) used in hydraulic oils, electrical
transformers or other equipment owned by such Person; and (v) neither Borrower,
the REIT nor any Partnership or Subsidiary has received any notice or claim to
the effect that it is or may be liable to any Person as a result of the Release
or threatened Release of a Contaminant into the environment.
5.23 UNENCUMBERED PROPERTIES. Each of the Properties listed on SCHEDULE 1
qualifies as an Unencumbered Property. The Aggregate Occupancy Rate of the
Unencumbered Properties is at least ninety percent (90%).
5.24 SOLVENCY. Borrower is and will be Solvent after giving effect to the
disbursements of the Loans and the payment and accrual of all fees then payable.
5.25 TITLE TO ASSETS; NO LIENS. Borrower has good, indefeasible and
merchantable title to all Properties owned or leased by it, and each of the
Unencumbered Properties is free and clear of all Liens, except Permitted Liens.
5.26 USE OF PROCEEDS. Borrower's use of the proceeds of the Loans are, and
will continue to be, legal and proper uses (and to the extent necessary, duly
authorized by Borrower's partners) and such uses are consistent with all
applicable laws and statutes and SECTION 7.9.
5.27 REIT CAPITALIZATION. All of the capital stock of the REIT has been
issued in compliance with all applicable Requirements of Law.
5.28 ERISA. Neither the REIT nor any ERISA Affiliate thereof (including,
for all purposes under this SECTION 5.28, Borrower) has in the past five (5)
years maintained or contributed to or currently maintains or contributes to any
Benefit Plan. No Investment Partnership has or is likely to incur any liability
with respect to any Benefit Plan maintained or contributed to by such Investment
Partnership or its ERISA Affiliates, which would have a Material Adverse Effect
on Borrower. Neither the REIT nor any ERISA Affiliate thereof has during the
past five (5) years maintained or contributed to or currently maintains or
contributes to any employee welfare benefit plan within the meaning of Section
3(1) of ERISA which provides benefits to retirees. Neither the REIT nor any
ERISA Affiliate thereof is now contributing nor has it ever contributed to or
been obligated to contribute to any Multiemployer Plan, no employees or former
employees of the REIT, or such ERISA Affiliate have been covered by any
Multiemployer Plan in respect of their employment by the REIT, and no ERISA
Affiliate of the REIT has or is likely to incur any withdrawal liability with
respect to any Multiemployer Plan which would have a Material Adverse Effect on
the REIT.
5.29 STATUS AS A REIT. The REIT (i) is a real estate investment trust as
defined in Section 856 of the Internal Revenue Code (or any successor provision
thereto), (ii) has not revoked its election to be a real estate investment
trust, (iii) has not engaged in any "prohibited transactions" as defined in
Section 856(b)(6)(iii) of the Internal Revenue Code (or any successor provision
thereto), and (iv) for its current "tax year" (as defined in the Internal
Revenue Code) is and for all prior tax years subsequent to its election to be a
real estate investment trust has been entitled to a dividends paid deduction
which meets the requirements of Section 857 of the Internal Revenue Code.
5.30 OWNERSHIP. The REIT does not own or have any interest in any other
Person, other than its general partnership interests in Borrower and in the ATC
Partnership.
5.31 NYSE LISTING. The common stock of the REIT is and will continue to be
listed for trading on either the New York Stock Exchange or the American Stock
Exchange.
5.32 CURRENT CONSTRUCTION PROJECTS. SCHEDULE 5.32 sets forth a description
of all of the Current Construction Projects and all of the Construction Projects
presently planned for 1997 including with respect to each project: its location,
gross leasable area, total budgeted cost, construction commencement date and
expected Rent Stabilization Date which information shall be deemed to be updated
to reflect information set forth in Quarterly Operating Reports delivered to
Agent pursuant to SECTION 6.1.1.
ARTICLE VI
REPORTING COVENANTS
Borrower covenants and agrees that, on and after the date hereof, until
payment in full of all of the Obligations, the expiration of the Commitments and
termination of this Agreement:
6.1 FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING INFORMATION.
Borrower shall maintain or cause to be maintained a system of accounting
established and administered in accordance with sound business practices and
consistent with past practice to permit preparation of quarterly and annual
financial statements in conformity with GAAP, and each of the financial
statements described below shall be prepared on a consolidated basis for the
REIT and for the Borrower from such system and records. Borrower shall deliver
or cause to be delivered to Agent (with copies sufficient for each Lender):
6.1.1 QUARTERLY OPERATING REPORTS. As soon as practicable, and in any event
within fifty (50) days after the end of each Fiscal Quarter, operating
statements in the form of EXHIBIT C or other form approved by Agent and rent
rolls (on Borrower's detailed form of rent roll) for each Portfolio Property
dated as of the last day of such Fiscal Quarter (the "QUARTERLY OPERATING
REPORTS"), in form and substance satisfactory to Agent, certified by the REIT's
chief financial officer or treasurer.
6.1.2 QUARTERLY FINANCIAL STATEMENTS CERTIFIED BY CFO. As soon as
practicable, and in any event within fifty (50) days after the end of each of
the first three Fiscal Quarters, consolidated balance sheets, statements of
operations and statements of cash flow for the REIT and the Borrower ("FINANCIAL
STATEMENTS"), which may be in the form provided to the Commission on the REIT's
Form 10Q and the Borrower's Form 10Q (unless the Borrower is not required to
file a Form 10Q), and certified by the REIT's chief financial officer or
treasurer.
6.1.3 ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after the close
of each Fiscal Year, annual Financial Statements of the REIT and of the
Borrower, on a consolidated basis (in the form provided to the Commission on the
REIT's Form 10K and the Borrower's Form 10K), audited and certified without
qualification by the Accountants provided, however, that at such time as the
Borrower is no longer required to file a Form 10K with the Commission, Borrower
may deliver only the REIT's audited Financial Statement accompanied by a letter
from the Accountants stating that with the exception of the minority interest
line there is no material difference between the Financial Statements of
Borrower and such audited Financial Statements of the REIT. To the extent Agent
desires additional details or supporting information with respect to
Partnerships or individual Portfolio Properties not contained in the REIT's or
Borrower's Form 10K, Borrower shall provide Agent with such details or
supporting information as Agent requests which is reasonably available to
Borrower.
6.1.4 OFFICER'S CERTIFICATE. (i) Together with each delivery of any
Financial Statement pursuant to SECTIONS 6.1.2 and 6.1.3, (A) an Officer's
Certificate of the REIT stating that each of the Financial Statements delivered
to Agent therewith (i) has been prepared in accordance with the books and
records of the REIT and Borrower on a consolidated basis, and (ii) fairly
presents the financial condition of the REIT and Borrower on a consolidated
basis, at the dates thereof (and, if applicable, subject to normal year-end
adjustments) and the results of its operations and cash flows, on a consolidated
basis, for the period then ended; (B) an Officer's Certificate of the REIT,
stating that the executive officer who is the signatory thereto (which officer
shall be the chief executive officer, the chief operating officer, the chief
financial officer or the treasurer of the REIT) has reviewed, or caused under
his supervision to be reviewed, the terms of this Agreement and the other
principal Loan Documents, and has made, or caused to be made under his
supervision, a review in reasonable detail of the transactions and condition of
Borrower and the REIT, during the accounting period covered by such Financial
Statements, and that such review has not disclosed the existence during or at
the end of such accounting period, and that the signers do not have knowledge of
the existence as of the date of the Officer's Certificate, of any condition or
event which constitutes an Event of Default or Unmatured Event of Default, or,
if any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action has been taken, is being taken and
is proposed to be taken with respect thereto; and (C) a Compliance Certificate
demonstrating in reasonable detail (which detail shall include actual
calculation and supporting information) compliance during and at the end of such
accounting periods with the financial covenants contained in ARTICLE IX.
6.1.5 CASH FLOW PROJECTIONS. Within ninety (90) days after the end of each
Fiscal Year, projections of Borrower, on a consolidated basis, detailing
expected sources and uses of cash for the next Fiscal Year together with an
Officer's Certificate of the REIT stating that such projections (1) have been
prepared by Borrower in light of the past business and performance of Borrower
on a consolidated basis and (2) represent, as of the date thereof, the
reasonable good faith estimates of Borrower's financial personnel. Borrower
shall also provide such additional supporting details as Agent may reasonably
request.
6.1.6 [Intentionally Deleted]
6.1.7 KNOWLEDGE OF EVENT OF DEFAULT. Promptly upon Borrower obtaining
knowledge (i) of any condition or event which constitutes an Event of Default or
Unmatured Event of Default, or becoming aware that any Lender has given notice
or taken any other action with respect to a claimed Event of Default or
Unmatured Event of Default or (ii) of any condition or event which has a
Material Adverse Effect on Borrower or the REIT, an Officer's Certificate
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such Lender and the nature of
such claimed Event of Default, Unmatured Event of Default, event or condition,
and what action Borrower and/or the REIT has taken, is taking and proposes to
take with respect thereto.
6.1.8 LITIGATION, ARBITRATION OR GOVERNMENT INVESTIGATION. Promptly upon
Borrower or the REIT obtaining knowledge of (i) the institution of, or threat
of, any material action, suit, proceeding, governmental investigation or
arbitration against or affecting Borrower or the REIT not previously disclosed
in writing by Borrower to Agent pursuant to this SECTION 6.1.8, or (ii) any
material development in any action, suit, proceeding, governmental investigation
or arbitration already disclosed, which, in either case, has a Material Adverse
Effect on Borrower or the REIT, a notice thereof to Agent and such other
information as may be reasonably available to it to enable Agent, Lenders and
their counsel to evaluate such matters.
6.1.9 ESTABLISHMENT OF BENEFIT PLAN AND INCREASE IN CONTRIBUTIONS TO THE
BENEFIT PLAN. Not less than ten (10) days prior to the effective date thereof, a
notice to Agent of the establishment of a Benefit Plan (or the incurrence of any
obligation to contribute to a Multiemployer Plan) by Borrower, the REIT or any
ERISA Affiliate. Within thirty (30) days after the first to occur of an
amendment of any then existing Benefit Plan of Borrower, the REIT or any ERISA
Affiliate which will result in an increase in the benefits under such Benefit
Plan or a notification of any such increase, or the establishment of any new
Benefit Plan by Borrower, the REIT or any ERISA Affiliate or the commencement of
contributions to any Benefit Plan to which Borrower, the REIT or any ERISA
Affiliate was not previously contributing, a copy of said amendment,
notification or Benefit Plan. For so long as any such Benefit Plan exists,
prompt notice of any Termination Event, prohibited transaction, funding waiver
request, unfavorable determination letter or withdrawal liability under a
Multiemployer Plan.
6.1.10 FAILURE OF THE REIT TO QUALIFY AS REAL ESTATE INVESTMENT TRUST.
Promptly upon, and in any event within forty-eight (48) hours after Borrower
first has actual knowledge of (i) the REIT failing to continue to qualify as a
real estate investment trust as defined in Section 856 of the Internal Revenue
Code (or any successor provision thereof), (ii) any act by the REIT causing its
election to be taxed as a real estate investment trust to be terminated, (iii)
any act causing the REIT to be subject to the taxes imposed by Section 857(b)(6)
of the Internal Revenue Code (or any successor provision thereto), or (iv) the
REIT failing to be entitled to a dividends paid deduction which meets the
requirements of Section 857 of the Internal Revenue Code, a notice of any such
occurrence or circumstance.
6.1.11 ASSET ACQUISITIONS AND DISPOSITIONS, INDEBTEDNESS, ETC. Without
limiting ARTICLE VIII or any other restriction in the Loan Documents, and in all
events not later than the same Business Day on which there is public disclosure
of any material Investments (other than in Cash Equivalents), acquisitions,
dispositions, disposals, divestitures or similar transactions involving
Property, the creation of Liens on any of the Portfolio Properties, other than
Non-Outlet Properties, the execution of any long term leases of real estate in
which the Borrower or its Subsidiary is the lessee, the raising of additional
equity or the incurring or repayment of material Indebtedness, by or with
Borrower, any GP Partnership or Subsidiary or the REIT, telephonic or facsimile
notice thereof to Lori Y. Litow or such other person(s) as Agent may designate
from time to time, and, if requested by Agent, promptly upon consummation of
such transaction, a Compliance Certificate demonstrating in reasonable detail
(which detail shall include actual calculations) compliance, after giving effect
to such proposed transaction(s), with the covenants contained in ARTICLE IX.
6.1.12 OTHER INFORMATION. Such other information, reports, contracts,
schedules, lists, documents, agreements and instruments in the possession of the
REIT or Borrower with respect to (i) the Portfolio Properties, (ii) any material
change in the REIT's investment, finance or operating policies, or (iii)
Borrower's or the REIT's business, condition (financial or otherwise),
operations, performance, properties or prospects as Agent may from time to time
reasonably request, including, without limitation, annual information with
respect to cash flow projections, budgets, operating statements (current year
and immediately preceding year), rent rolls, lease expiration reports, leasing
status reports, tenant sales reports (to the extent available), note payable
summaries, equity funding requirements, contingent liability summaries, line of
credit summaries, tenant improvement allowance summaries, note receivable
summaries, schedules of outstanding letters of credit, summaries of cash and
Cash Equivalents, projections of management and leasing fees and overhead
budgets. Provided that Agent gives Borrower reasonable prior notice and an
opportunity to participate, Borrower hereby authorizes Agent to communicate with
the Accountants and authorizes the Accountants to disclose to Agent any and all
financial statements and other information of any kind, including copies of any
management letter or the substance of any oral information, that such
accountants may have with respect to Borrower's or the REIT's condition
(financial or otherwise), operations, properties, performance and prospects. At
Agent's request, Borrower shall deliver a letter addressed to the Accountants
instructing them to disclose such information in compliance with this SECTION
6.1.12.
6.1.13 PRESS RELEASES; SEC FILINGS AND FINANCIAL STATEMENTS. Telephonic or
telecopy notice to Agent concurrent with or prior to issuance of any material
press release concerning the REIT or Borrower and, as soon as practicable after
filing with the Commission, all reports and notices, proxy statements,
registration statements and prospectuses of the REIT. All materials sent or made
available generally by the REIT to the holders of its publicly-held Securities
or to a trustee under any indenture or filed with the Commission, including all
periodic reports required to be filed with the commission, will be delivered to
Agent and Lenders as soon as available.
6.1.14 ACCOUNTANT REPORTS. Copies of all reports prepared by the
Accountants and submitted to Borrower or the REIT in connection with each
annual, interim or special audit or review of the financial statements or
practices of Borrower or the REIT, including the comment letter submitted by the
Accountants in connection with their annual audit.
6.1.15 TERMINATION OR MODIFICATION OF EARTHQUAKE COVERAGE. Promptly upon,
and in any event within thirty (30) days after Borrower first has knowledge of
the termination or modification (with respect to the amount of either the
coverage provided or the applicable deductible) of the coverage provided by the
blanket property insurance rider regarding earthquake insurance for Portfolio
Properties located in "Zone 1" maintained by Borrower as of the date of this
Agreement, a notice of such termination or modification.
6.2 ENVIRONMENTAL NOTICES. Borrower shall notify Agent, in writing, as soon
as practicable, and in any event within ten (10) days after Borrower's or the
REIT's learning thereof, of any: (i) written notice or claim to the effect that
Borrower or the REIT is or may be liable to any Person as a result of any
material Release or threatened Release of any Contaminant into the environment;
(ii) written notice that Borrower or the REIT is subject to investigation by any
Governmental Authority evaluating whether any Remedial Action is needed to
respond to the Release or threatened Release of any Contaminant into the
environment; (iii) written notice that any Portfolio Property is subject to an
Environmental Lien; (iv) written notice that Borrower, any Subsidiary or
Partnership or the REIT has received a notice of violation of any Environmental
Laws by Borrower, any Subsidiary or Partnership or the REIT; (v) commencement or
written threat of any judicial or administrative proceeding alleging a violation
of any Environmental Laws; (vi) written notice from a Governmental Authority of
any changes to any existing Environmental Laws that will have a Material Adverse
Effect on the operations of Borrower or the REIT; or (vii) any proposed
acquisition of stock, assets, real estate or leasing of property, or any other
action by Borrower that, to the best of Borrower's knowledge, could subject
Borrower, any Subsidiary or Partnership or the REIT to environmental, health or
safety Liabilities and Costs that will have a Material Adverse Effect on
Borrower or the REIT.
6.3 CONFIDENTIALITY. Confidential Information obtained by Agent or Lenders
pursuant to this Agreement or in connection with the Facility shall not be
disseminated by Agent or Lenders and shall not be disclosed to third parties
except to regulators, taxing authorities and other governmental agencies having
jurisdiction over Agent or such Lender or otherwise in response to Requirements
of Law, to their respective auditors and legal counsel and in connection with
regulatory, administrative and judicial proceedings as necessary or relevant
including enforcement proceedings relating to the Loan Documents, and to any
prospective assignee of or participant in a Lender's interest under this
Agreement or any prospective purchaser of the assets or a controlling interest
in any Lender, PROVIDED that such prospective assignee, participant or purchaser
first agrees to be bound by the provisions of this SECTION 6.3. For purposes
hereof, "CONFIDENTIAL INFORMATION" shall mean all nonpublic information obtained
by Agent or Lenders, unless and until such information becomes publicly known,
other than as a result of unauthorized disclosure by Agent or Lenders of such
information.
ARTICLE VII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, on and after the date hereof, until
payment in full of all of the Obligations, the expiration of the Commitments and
termination of this Agreement:
7.1 EXISTENCE. Each of Borrower and the REIT shall at all times maintain
its existence and preserve and keep in full force and effect its rights and
franchises. Borrower shall remain a Delaware limited partnership with the REIT
as its sole general partner.
7.2 QUALIFICATION, NAME. Each of Borrower and the REIT shall qualify and
remain qualified to do business in each jurisdiction in which any Portfolio
Property is located or in which the nature of its business requires it to be so
qualified except for those jurisdictions where failure to so qualify would not
have a material Adverse Effect on Borrower. Borrower will transact business
solely in its own name or in the commonly known name of one of the Portfolio
Properties.
7.3 COMPLIANCE WITH LAWS, ETC. Each of Borrower and REIT shall (i) comply
with all Requirements of Law, and all restrictive covenants affecting it or its
properties, performance, prospects, assets or operations, and (ii) obtain as
needed all Permits necessary for its operations and maintain such in good
standing, except where the failure to do so will not have a Material Adverse
Effect on Borrower.
7.4 PAYMENT OF TAXES AND CLAIMS. Each of Borrower and the REIT shall pay
(i) all taxes, assessments and other governmental charges imposed upon it or on
any of its properties or assets or in respect of any of its franchises,
business, income or property before any penalty or interest accrues thereon, and
(ii) all claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which by
law have or may become a Lien other than a judgment lien upon any of Borrower's
properties or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto, provided, however that the payment of such taxes,
assessments, charges and claims may be deferred so long as the validity or
amount thereof shall currently be contested in good faith by appropriate
proceedings and if Borrower shall have set aside in its books adequate reserves
specifically with respect thereto, but Borrower shall pay such matters prior to
the foreclosure of a Lien which may have attached as security therefor.
7.5 MAINTENANCE OF PROPERTIES; INSURANCE. Borrower shall maintain in good
repair, working order and condition, excepting ordinary wear and tear, all of
the Portfolio Properties and will make or cause to be made all appropriate
repairs, renewals and replacements thereof. Borrower shall maintain commercially
reasonable and appropriate amounts of "all risk" property and liability
insurance, which insurance shall include in any event:
(a) with respect to each Property: (i) property and casualty
insurance (including coverage for flood and water damage for any
Portfolio Property located within a 100-year flood plain) in an amount
not less than the replacement costs of the improvements thereon
(subject to reasonable deductibles and, in the case of flood insurance,
subject to the maximum coverages available under the National Flood
Insurance Program), and (ii) loss of rental insurance income in an
amount not less than one year's gross revenues of such Portfolio
Property; and
(b) comprehensive general liability insurance in an amount not less
than $20,000,000 per occurrence, including all insurance pursuant to
umbrella and excess liability policies.
At the request of Agent, Borrower shall provide, evidence of insurance,
including certificates of insurance and binders.
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Borrower shall
permit, and shall cause the REIT and each Subsidiary or Partnership to permit,
any authorized representative(s) designated by any Lender to visit and inspect
any of its properties, to inspect financial and accounting records and leases,
and to make copies and take extracts therefrom, all at such times after
reasonable advance notice during normal business hours and as often as any
Lender may reasonably request. In connection therewith, Borrower shall pay all
expenses of the Agent (but not of the other Lenders) of the types described in
SECTION 12.1 subject to the limitation that prior to an Event of Default the
Borrower shall not be required to reimburse expenses for inspections of
Properties made more frequently than annually. Borrower will keep proper books
of record and account in which entries, in conformity with GAAP and as otherwise
required by this Agreement and applicable Requirements of Law, shall be made of
all dealings and transactions in relation to its businesses and activities and
as otherwise required under SECTION 6.1.
7.7 MAINTENANCE OF PERMITS, ETC. Each of Borrower and the REIT will
maintain in full force and effect all Permits, franchises, patents, trademarks,
trade names, copyrights, authorizations or other rights necessary for the
operation of its business, except where the failure to obtain any of the
foregoing would not have a Material Adverse Effect on Borrower; and notify Agent
in writing, promptly after learning thereof, of the suspension, cancellation,
revocation or discontinuance of or of any pending or threatened action or
proceeding seeking to suspend, cancel, revoke or discontinue any material
Permit, patent, trademark, trade name, copyright, governmental approval,
franchise authorization or right.
7.8 CONDUCT OF BUSINESS. Except for Permitted Investments pursuant to
SECTION 9.9 and Investments in cash and Cash Equivalents, Borrower shall engage
only in the business of direct ownership, operation and development of retail
outlet properties of the general type owned by Borrower as of the Closing Date,
and any other business activities of Borrower will remain incidental thereto.
7.9 USE OF PROCEEDS. Borrower shall use the proceeds of the Loans only for
predevelopment costs, development costs, acquisitions, working capital, equity
Investments and repayment of Indebtedness, including required interest and/or
principal payments thereon. Loan proceeds shall not be used for the payment of
dividends or other distributions to, or the repurchase of shares or limited
partnership interests from, the holder of any equity interest in Borrower or the
REIT.
7.10 SECURITIES LAW COMPLIANCE. Each of the Borrower and the REIT shall
comply in all material respects with all rules and regulations of the Commission
and file all reports required by the Commission relating to the Borrower's or
the REIT's publicly-held Securities.
7.11 CONTINUED STATUS AS A REIT; PROHIBITED TRANSACTIONS. The REIT (i) will
continue to be a real estate investment trust as defined in Section 856 of the
Internal Revenue Code (or any successor provision thereto), (ii) will not revoke
its election to be a real estate investment trust, (iii) will not engage in any
"prohibited transactions" as defined in Section 856(b)(6)(iii) of the Internal
Revenue Code (or any successor provision thereto), and (iv) will continue to be
entitled to a dividend paid deduction meeting the requirements of Section 857 of
the Internal Revenue Code.
7.12 NYSE LISTED COMPANY. The common stock of the REIT shall at all times
be listed for trading on the New York Stock Exchange.
7.13 PROPERTY MANAGEMENT. All Portfolio Properties (other than Non-Outlet
Properties) in which the direct or indirect ownership interest of Borrower
exceeds fifty percent (50%) shall be directly managed by Borrower.
7.14 INTEREST RATE CONTRACTS. At all times when LIBOR for 30 day Interest
Periods has, for 30 consecutive days, exceeded eight and one-quarter percent
(8.25%), Borrower shall maintain in effect Interest Rate Contracts which are
satisfactory to the Agent covering at least forty percent (40%) of the aggregate
amount of variable interest rate Indebtedness of Borrower (including the
Facility) then outstanding plus any additional Loans which are projected to be
advanced hereunder within 90 days after the acquisition of such Interest Rate
Contracts. In determining whether such Interest Rate Contracts are satisfactory,
the Agent shall not require that the terms thereof extend beyond the Termination
Date.
ARTICLE VIII
NEGATIVE COVENANTS
Borrower covenants and agrees that, on and after the date hereof, until
payment in full of all of the Obligations, the expiration of the Commitments and
termination of this Agreement:
8.1 LIENS. Neither Borrower nor the REIT shall(i) directly or indirectly
create, incur, assume or permit to exist any Lien, except for Permitted Liens,
on or with respect to all or any portion of Woodbury Common; (ii) directly or
indirectly create, assume or permit to exist any agreement (other than the Loan
Documents and the Unsecured Term Note Secured Debt Limitation set forth in the
Unsecured Term Note Indenture) prohibiting the creation of any Lien on Woodbury
Common. This SECTION 8.1 shall cease to be applicable after Borrower's senior
long-term unsecured debt obligations are rated at least BBB or Baa2 by one or
both of the Rating Agencies.
8.2 TRANSFERS OF WOODBURY COMMON. Borrower shall not transfer, directly or
indirectly, all or any interest in Woodbury Common except (i) Leases to tenants
which are not Affiliates of Borrower entered into in the ordinary course of
business and (ii) sale of Pad Sites.
8.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Neither Borrower nor the REIT
shall, without the prior written consent of the Agent
(a) Enter into any merger or consolidation or liquidate, wind-up or
dissolve (or suffer any liquidation or dissolution);
(b) Change its Fiscal Year;
(c) Except for Permitted Investments, engage in any line of
business other than as expressly permitted under SECTION 7.8;
(d) Create or acquire any Subsidiary or become a partner in any
Partnership PROVIDED, however that the Agent shall not unreasonably
withhold its consent under this paragraph (d) after a review of all
information requested by the Agent regarding the applicable entity
including the names of others having an ownership interest therein, the
proposed structure of the entity, the size, location and leasing of the
Property owned or proposed to be owned by such entity and the terms of
any existing or contemplated Indebtedness of such entity.
8.4 ERISA. Neither the Borrower nor the REIT shall permit any ERISA
Affiliates to do any of the following to the extent that such act or failure to
act would result in the aggregate, after taking into account any other such acts
or failure to act, in a Material Adverse Effect on Borrower or the REIT:
(a) Engage, or knowingly permit an ERISA Affiliate to engage, in
any prohibited transaction described in Section 406 of the ERISA or
Section 4975 of the Internal Revenue Code which is not exempt under
Section 407 or 408 of ERISA or Section 4975(d) of the Internal Revenue
Code for which a class exemption is not available or a private
exemption has not been previously obtained from the DOL;
(b) Permit to exist any accumulated funding deficiency (as defined
in Section 302 of ERISA and Section 412 of the Internal Revenue Code),
whether or not waived;
(c) Fail, or permit an ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any
waived funding deficiency to any Plan if such failure could result in
the imposition of a Lien or otherwise would have a Material Adverse
Effect on Borrower or the REIT;
(d) Terminate, or permit an ERISA Affiliate to terminate, any
Benefit Plan which would result in any liability of Borrower or an
ERISA Affiliate under Title IV of ERISA or the REIT; or
(e) Fail, or permit any ERISA Affiliate to fail, to pay any
required installment under section (m) of Section 412 of the Internal
Revenue Code or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment or
other payment, if such failure could result in the imposition of a Lien
or otherwise would have a Material Adverse Effect on Borrower or the
REIT.
8.5 AMENDMENT OF CONSTITUENT DOCUMENTS. Except for any such amendment that
is required (i) under any Requirement of Law imposed by any Governmental
Authority or (ii) in order to maintain compliance with SECTION 7.11: (1) neither
Borrower nor any Partnership shall amend its Partnership Agreement (including,
without limitation, as to the admission of any new partner, directly or
indirectly), and (2) the REIT shall not amend its articles of incorporation or
by-laws; in any such case, except amendments which do not materially affect the
ability of the Borrower or the REIT to perform its obligations under the Loan
Documents or other amendments which have received the prior written consent of
the Agent.
8.6 DISPOSAL OF PARTNERSHIP INTERESTS OR STOCK IN SUBSIDIARIES. Neither
Borrower nor the REIT will directly or indirectly convey, sell, transfer,
assign, pledge or otherwise encumber or dispose of any of its partnership (or
other ownership) interests or stock in any Partnership or Subsidiary without
first providing the notice and (if required) Compliance Certificate pursuant to
SECTION 6.1.11 with such disposition or encumbrance of such partnership interest
or stock being treated the same as disposition or encumbrance of the Property
owned by the applicable Partnership or Subsidiary.
8.7 MARGIN REGULATIONS. No portion of the proceeds of any Loans shall be
used in any manner which might cause the extension of credit or the application
of such proceeds to violate Regulation G, U or X or any other regulation of the
Federal Reserve Board or to violate the Securities Exchange Act or the
Securities Act, in each case as in effect on the applicable Funding Date.
8.8 WITH RESPECT TO THE REIT:
8.8.1 The REIT shall not own any material assets (other than a certain
$3,600,000 promissory note from Balaban and Arminta Development Co. Rental
Partnership secured by a pledge of partnership interest in Solvang Designer
Outlets and its interest in the ATC Partnership) or engage in any line of
business other than owning partnership interests in Borrower.
8.8.2 The REIT shall not directly or indirectly create, incur, assume or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except the Obligations and other Borrower Debt.
8.8.3 The REIT shall not directly or indirectly create, incur, assume or
permit to exist any Lien on or with respect to any of its Property or assets.
8.8.4 The REIT will not directly or indirectly convey, sell, transfer,
assign, pledge or otherwise encumber or dispose of any of its partnership
interests in Borrower so as to reduce its interest in Borrower to less than 60%.
8.9 ADDITIONAL UNSECURED BANK DEBT. Neither Borrower nor any Subsidiaries
of Borrower shall create, incur, assume or otherwise become liable for any
unsecured line of credit or other unsecured loan from any bank or financial
institution, other than the Facility, nor shall the Borrower cause any letter of
credit to be issued by any bank or financial institution for the account of
Borrower or any Subsidiaries of Borrower, other than the Letters of Credit.
8.10 RESTRICTIONS ON INDEBTEDNESS. Except with the prior written consent of
Requisite Lenders, the Borrower will not create, incur, assume, guarantee or
become or remain liable, contingently or otherwise, or agree not to do any of
same, with respect to any Indebtedness other than:
(a) Indebtedness to the Lenders arising under this
Agreement and Indebtedness to the holders of the Unsecured Term Notes arising
thereunder;
(b) current liabilities of the Borrower 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 7.4;
(d) Indebtedness in respect of judgments or awards that
have been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which the
Borrower shall at the time in good faith be prosecuting an appeal or proceedings
for review and in respect of which a stay of execution shall have been obtained
pending such appeal or review;
(e) Endorsements for collection, deposit or
negotiation and warranties of products or services, in each case incurred
in the ordinary course of business;
(f) Indebtedness consisting of purchase money
financing for equipment used in the ordinary course of Borrower's business
provided that the amount of each such financing may not exceed 100% of the cost
of the purchased property.
(g) Nonrecourse Indebtedness of Borrower secured by a
Lien on a Portfolio Property (other than Woodbury Common for so long as
SECTION 8.1 remains in effect) which is completely non-recourse to the Borrower
and to the REIT to the extent the same does not create a violation of SECTIONS
9.4, 9.5, 9.6 OR 9.7 provided that (i) upon the creation or assumption of any
such Indebtedness Borrower shall provide the Agent with a notice describing the
terms of such Indebtedness and the security therefor and a copy of the
promissory note or other instrument containing the nonrecourse provisions, and
(ii) if the terms of such Indebtedness include financial covenants, such
covenants are determined by the Agent in its sole discretion to be less
stringent than the covenants set forth in ARTICLE IX.
(h) Indebtedness of Borrower other than Nonrecourse
Indebtedness for borrowed money to the extent the same does not create a
violation of SECTIONS 9.4, 9.5, 9.6 OR 9.7 provided that (i) upon the creation
or assumption of any such Indebtedness Borrower shall provide the Agent with a
notice describing the terms of such Indebtedness, (ii) such Indebtedness must be
permitted under the terms of the Unsecured Term Notes, (iii) if the terms of
such Indebtedness include financial covenants such covenants are determined by
the Agent, in its sole discretion, to be less stringent than the covenants set
forth in ARTICLE IX, and (iv) except for facilities having FNBB as sole lender
or as agent for a group of lenders, such Indebtedness has a term which matures
at least twenty-four (24) months after the Termination Date.
(i) Indebtedness consisting of purchase money financing
for Land intended for development in connection with future Construction
Projects to the extent the same does not create a violation of SECTIONS 9.4,
9.5, 9.6 OR 9.7 provided that (i) the amount of such Indebtedness does not
exceed 100% of the cost of the purchased Land, (ii) the Indebtedness is secured
by a Lien on the purchased Land, (iii) the aggregate amount of the Indebtedness
described in this paragraph outstanding at any time shall not exceed
$10,000,000.00, and (iv) upon the creation of any such Indebtedness Borrower
shall provide the Agent with a notice describing the terms of such Indebtedness.
8.11 CONSTRUCTION PROJECTS. Borrower shall not commence construction of any
Construction Project if the addition of the budgeted project costs for such
project to the CIP Budget Amount would result in a violation of SECTION 9.11. At
all times when the Portfolio Occupancy Rate is less than ninety-five percent
(95%) Borrower shall not commence construction of any Construction Project prior
to the earlier of (a) the date that premises which in the aggregate constitute
at least twenty percent (20%) of the gross leasable area of such Construction
Project are subject to executed leases under which (i) occupancy by the tenant
thereunder is conditioned only upon completion of construction of the relevant
improvements and (ii) such tenant is otherwise unconditionally committed to take
occupancy upon completion of such construction or (b) the date that the
Portfolio Occupancy Rate again exceeds ninety-five percent (95%).
8.12 DISCONTINUITY IN MANAGEMENT. In the event that any three of the five
Executive Officers shall cease to be active on a full time, continuous basis in
the senior management of Borrower and the REIT ("DISCONTINUITY IN MANAGEMENT"),
Borrower shall have up to one hundred eighty (180) days to obtain the approval
of Requisite Lenders to additional executives, such that the remaining and new
management executives, as a group, have substantial and sufficient knowledge,
experience and capabilities in the management of a publicly-held company engaged
in the operation of a multi-asset real estate business of the type engaged in by
Borrower. In the event Borrower shall fail to obtain approval of Requisite
Lenders as aforesaid within said 180-day period, then Borrower shall, at the
election and upon the demand of Requisite Lenders, pay in full all Obligations
under the Loan Documents not later than sixty (60) days after the end of such
180-day period, whereupon this Agreement and all Commitments hereunder shall be
terminated. Any Lender which abstains or otherwise fails to respond to any
request by Borrower for approval under this SECTION 8.12 within ten (10)
Business Days shall be counted among the Requisite Lenders approving the
proposed additional executives. In the event that Barry Ginsburg should retire
prior to the time that there has been any other changes in the Executive
Officers, the Borrower may designate another officer to replace Mr. Ginsburg
among the Executive Officers and such replacement shall not be counted when
determining whether there has been a Discontinuity in Management.
ARTICLE IX
FINANCIAL COVENANTS
Borrower covenants and agrees that, on and after the date of this Agreement
and until payment in full of all the Obligations, the expiration of all
Commitments, the termination of all Letters of Credit and the termination of
this Agreement:
9.1 [Intentionally Deleted]
9.2 [Intentionally Deleted]
9.3 MINIMUM FAIR MARKET NET WORTH. Borrower will maintain a Fair Market Net
Worth of not less than Three Hundred Twenty-Five Million Dollars ($325,000,000)
plus ninety percent (90%) of Net Offering Proceeds received by Borrower after
the Closing Date.
9.4 TOTAL LIABILITIES TO ADJUSTED ASSET VALUE RATIO. The ratio of Total
Liabilities to Adjusted Asset Value shall not exceed 0.50:1.
9.5 MAXIMUM SECURED BORROWER DEBT. The Secured Borrower Debt shall not
exceed (i) the maximum amount of Secured Borrower Debt which may exist without
violation of the Unsecured Term Note Secured Debt Limitation MINUS (ii) the sum
of (A) the outstanding principal of the Loans and (B) the face amount of Letters
of Credit outstanding hereunder.
9.6 OPERATING CASH FLOW TO DEBT SERVICE RATIO. The ratio of Operating Cash
Flow to Debt Service shall not be less than 2.0:1.
9.7 UNENCUMBERED ASSETS TO TOTAL LIABILITIES RATIO. The ratio of
Unencumbered Assets to Total Liabilities shall not be less than 1.75:1.
9.8 AGGREGATE OCCUPANCY RATE. The Aggregate Occupancy Rate of the
Unencumbered Properties shall not be less than ninety percent (90%).
9.9 DISTRIBUTIONS.
9.9.1 Subject to SECTION 9.9.2, aggregate distributions to shareholders of
the REIT and all partners of Borrower other than the REIT shall not exceed the
lesser of (i) ninety percent (90%) of Funds From Operations for any Fiscal Year
or (ii) one hundred percent (100%) of Funds From Operations for any two (2)
consecutive Fiscal Quarters. For purposes of this SECTION 9.9, the term
"distributions" shall mean and include all dividends and other distributions to,
and the repurchase of stock or partnership interests from, the holder of any
equity interests in Borrower or the REIT.
9.9.2 Aggregate distributions during the continuance of any Event of
Default shall not exceed the lesser of (i) the aggregate amount permitted to be
made during the continuance thereof under SECTION 9.9.1, and (ii) the minimum
amount that the REIT must distribute to its shareholders in order to maintain
compliance with SECTION 7.11. If the Loans are not paid in full on the
Termination Date, no distributions shall be made thereafter except to the extent
expressly authorized in advance by Agent.
9.10 PERMITTED INVESTMENTS. Notwithstanding the limitations set forth in
SECTION 7.8, Borrower may make the following Permitted Investments, so long as
(i) the aggregate amount of all Permitted Investments does not exceed, at any
time, twenty percent (20%) of Total Assets, and (ii) the aggregate amount of
each of the following categories of Permitted Investments does not exceed the
specified percentage of Total Assets, in each case as of the date made:
Maximum
Percentage
Permitted Investment of Total Assets
Land and Non-Outlet Properties: 15%
Foreign Investments: 10%
Investment Mortgages: 10%
Partnerships: 15%.
For purposes of calculating compliance with the foregoing: (1) the amount of
each Investment will be deemed to be the original Acquisition Price thereof; (2)
in the case of each Investment in Land, Investment Mortgages and Partnerships,
the nature of underlying real property asset and the conduct of business in
respect thereof shall in all respects comply with the limitations set forth in
SECTION 7.8; and (3) Investments in Foreign Affiliates shall be counted as both
an investment in Partnerships and as a Foreign Investment but shall be counted
only once when determining the overall 20% limit.
9.11 CIP BUDGET AMOUNT TO ADJUSTED ASSET VALUE. The ratio of the CIP Budget
Amount to Adjusted Asset Value shall not exceed 0.25:1.
9.12 CALCULATION. Each of the foregoing ratios and financial requirements
shall be calculated as of the last day of each Fiscal Quarter, provided, however
that each of the foregoing ratios and financial requirements which is affected
by an increase in the outstanding balance of the Loans, by the issuance of a
Letter of Credit or by the sale or encumbrance of a Portfolio Property shall
also be recalculated as of the time of such event. For purposes of determining
compliance with SECTION 9.6, the period covered thereby shall be the immediately
preceding Fiscal Quarter.
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.1 EVENTS OF DEFAULT. Each of the following occurrences shall constitute
an Event of Default under this Agreement:
10.1.1 FAILURE TO MAKE PAYMENTS WHEN DUE. Borrower shall fail to pay (i)
any amount due on the Termination Date, (ii) any principal when due, or (iii)
any interest on any Loan, or any fee or other amount payable under any Loan
Documents, within five (5) days after the same becomes due.
10.1.2 REIT AND FINANCIAL COVENANTS. Borrower or the REIT shall breach any
covenant set forth in SECTION 7.11 or in ARTICLE IX (excluding SECTION 9.8).
10.1.3 AGGREGATE OCCUPANCY RATE. Borrower shall fail to satisfy the
financial covenant regarding the Aggregate Occupancy Rate set forth in SECTION
9.8 and such failure shall continue for sixty (60) days.
10.1.4 OTHER DEFAULTS. Borrower or the REIT shall fail duly and punctually
to perform or observe any agreement, covenant or obligation binding on Borrower
or the REIT under this Agreement or under any of the other Loan Documents (other
than as described in any other provision of this SECTION 10.1), and with respect
to agreements, covenants or obligations for which no time period for performance
is otherwise provided, such failure shall continue for fifteen (15) days after
Borrower or the REIT knew of such failure (or such lesser period of time as is
mandated by applicable Requirements of Law); PROVIDED, however, if such failure
is capable of cure but is not capable of cure within such fifteen (15) day
period, then if Borrower promptly undertakes action to cure such failure and
thereafter diligently prosecutes such cure to completion within forty-five (45)
days after Borrower or the REIT knew of such failure, then Borrower shall not be
in default hereunder.
10.1.5 BREACH OF REPRESENTATION OR WARRANTY. Any representation or warranty
made or deemed made by Borrower or the REIT to Agent or any Lender herein or in
any of the other Loan Documents or in any statement, certificate or financial
statements at any time given by Borrower pursuant to any of the Loan Documents
shall be false or misleading in any material respect on the date as of which
made.
10.1.6 DEFAULT AS TO OTHER INDEBTEDNESS. (i) Borrower, the REIT or any GP
Partnership shall have (A) failed to pay when due (beyond any applicable grace
period), any amount in respect of any Indebtedness of such party other than the
Obligations if the aggregate amount of such other Indebtedness is Five Million
Dollars ($5,000,000) or more; or (B) otherwise defaulted (beyond any applicable
grace period) under any Indebtedness of such party other than the Obligations if
(1) the aggregate amount of such other Indebtedness is Five Million Dollars
($5,000,000) or more, and (2) the holder of such Indebtedness has accelerated
such Indebtedness; or (ii) any such other Indebtedness shall have otherwise
become payable, or be required to be purchased or redeemed, prior to its
scheduled maturity; or (iii) the holder(s) of any Lien, in any amount, commence
foreclosure of such Lien upon any Property having an aggregate value in excess
of Five Million Dollars ($5,000,000); or (iv) any "Event of Default" shall exist
under the Unsecured Term Note Indenture.
10.1.7 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(a) An involuntary case shall be commenced against the REIT,
Borrower or any GP Partnership, and the petition shall not be dismissed
within sixty (60) days after commencement of the case, or a court
having jurisdiction shall enter a decree or order for relief in respect
of any such Person in an involuntary case, under any applicable
bankruptcy, insolvency or other similar law now or hereinafter in
effect; or any other similar relief shall be granted under any
applicable federal, state or foreign law; or
(b) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the
REIT, Borrower or any GP Partnership, or over all or a substantial part
of the property of any such Person, shall be entered; or an interim
receiver, trustee or other custodian of any such Person or of all or a
substantial part of the property of any such Person, shall be appointed
or a warrant of attachment, execution or similar process against any
substantial part of the property of any such Person, shall be issued
and any such event shall not be stayed, vacated, dismissed, bonded or
discharged within sixty (60) days of entry, appointment or issuance.
10.1.8 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The REIT,
Borrower, or any GP Partnership shall have an order for relief entered with
respect to it or commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or shall consent to
the entry of an order for relief in an involuntary case, or to the conversion of
an involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking of possession by a receiver, trustee or other
custodian for all or a substantial part of its property; any such Person shall
make any assignment for the benefit of creditors or shall be unable or fail, or
admit in writing its inability, to pay its debts as such debts become due; or
the general partner (or Person(s) serving in a similar capacity) of Borrower or
the REIT's Board of Directors (or any committee thereof) adopts any resolution
or otherwise authorizes any action to approve any of the foregoing.
10.1.9 JUDGMENTS AND ATTACHMENTS. (i) Any money judgment (other than a
money judgment covered by insurance but only if the insurer has admitted
liability with respect to such money judgment), writ or warrant of attachment,
or similar process involving in any case an amount in excess of One Million
Dollars ($1,000,000) shall be entered or filed against the REIT, Borrower, or
any GP Partnership or their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of thirty (30) days, or (ii) any
judgment or order of any court or administrative agency awarding material
damages shall be entered against any such Person in any action under the Federal
securities laws seeking rescission of the purchase or sale of, or for damages
arising from the purchase or sale of, any Securities, such judgment or order
shall have become final after exhaustion of all available appellate remedies
and, in Agent's judgment, the payment of such judgment or order would have a
Material Adverse Effect on such Person.
10.1.10 DISSOLUTION. Any order, judgment or decree shall be entered against
the REIT, Borrower, or any GP Partnership decreeing its involuntary dissolution
or split up and such order shall remain undischarged and unstayed for a period
in excess of thirty (30) days; or the REIT or Borrower shall otherwise dissolve
or cease to exist.
10.1.11 LOAN DOCUMENTS; FAILURE OF SUBORDINATION. If for any reason (i) any
Loan Document shall cease to be in full force and effect, or (ii) any Obligation
shall be subordinated in right of payment to any other unsecured liability of
the Borrower.
10.1.12 ERISA LIABILITIES. Any Termination Event occurs which will or is
reasonably likely to subject Borrower, the REIT or any ERISA Affiliate to a
liability which Agent reasonably determines will have a Material Adverse Effect
on Borrower or the REIT, or the plan administrator of any Benefit Plan applies
for approval under Section 412(d) of the Internal Revenue Code for a waiver of
the minimum funding standards of Section 412(a) of the Internal Revenue Code and
Agent reasonably determines that the business hardship upon which the Section
412(d) waiver was based will or would reasonably be anticipated to subject
Borrower or the REIT to a liability which Agent determines will have a Material
Adverse Effect on Borrower or the REIT.
10.1.13 ENVIRONMENTAL LIABILITIES. Borrower, the REIT or any Subsidiary or
Partnership becomes subject to any Liabilities and Costs which Agent reasonably
deems to have a Material Adverse Effect on such Person arising out of or related
to the Release at any Property of any Contaminant into the environment, or any
Remedial Action in response thereto, or any other violation of any Environmental
Laws.
10.1.14 SOLVENCY; MATERIAL ADVERSE CHANGE. Borrower or the REIT shall cease
to be Solvent, or there shall have occurred any material adverse change in the
business, operations, properties, assets or condition (financial or otherwise)
of Borrower or the REIT.
An Event of Default shall be deemed "continuing" until cured or waived in
writing in accordance with SECTION 12.4.
10.2 RIGHTS AND REMEDIES.
10.2.1 ACCELERATION, ETC. Upon the occurrence of any Event of Default
described in the foregoing SECTION 10.1.7 or 10.1.8 with respect to the REIT or
Borrower, the Commitments shall automatically and immediately terminate and the
unpaid principal amount of and any and all accrued interest on the Loans shall
automatically become immediately due and payable, with all additional interest
from time to time accrued thereon and without presentment, demand or protest or
other requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
or notice of acceleration), all of which are hereby expressly waived by
Borrower, and the obligations of Lenders to make any Loans hereunder shall
thereupon terminate; and upon the occurrence and during the continuance of any
other Event of Default, Agent shall, at the request, or may, with the consent of
Requisite Lenders, by written notice to Borrower, (i) declare that the
Commitments are terminated, whereupon the Commitments and the obligation of
Lenders to make any Loan hereunder shall immediately terminate, and/or (ii)
declare the unpaid principal amount of, any and all accrued and unpaid interest
on the Loans and all of the other Obligations to be, and the same shall
thereupon be, immediately due and payable with all additional interest from time
to time accrued thereon and without presentment, demand, or protest or other
requirements of any kind (including without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by Borrower.
Without limiting Agent's authority hereunder, on or after the Termination Date,
Agent shall, at the request, or may, with the consent, of Requisite Lenders
exercise any or all rights and remedies under the Loan Documents or applicable
law. Upon the occurrence of and during the continuance of an Event of Default,
Agent shall be entitled to request and receive, by or through Borrower or
appropriate legal process, any and all information concerning the REIT, Borrower
or any property of any of them, which is reasonably available to or obtainable
by Borrower.
10.2.2 WAIVER OF DEMAND. Demand, presentment, protest and notice of
nonpayment are hereby waived by Borrower. Borrower also waives, to the extent
permitted by law, the benefit of all exemption laws.
10.2.3 WAIVERS, AMENDMENTS AND REMEDIES. No delay or omission of Agent or
Lenders to exercise any right under any Loan Document shall impair such right or
be construed to be a waiver of any Event of Default or an acquiescence therein,
and any single or partial exercise of any such right shall not preclude other or
further exercise thereof or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of the Loan
Documents whatsoever shall be valid unless in writing signed by Agent after
obtaining written approval thereof or the signature thereon of those Lenders
required to approve such waiver, amendment or other variation, and then only to
the extent in such writing specifically set forth. All remedies contained in the
Loan Documents or by law afforded shall be cumulative and all shall be available
to Agent and Lenders until the Obligations have been paid in full, the
Commitments have expired or terminated and this Agreement has been terminated.
10.3 RESCISSION. If at any time after acceleration of the maturity of the
Loans, Borrower shall pay all arrears of interest and all payments on account of
principal of the Loans which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Unmatured Events of Default (other than nonpayment of principal of
and accrued interest on the Loans due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to SECTION 12.4, then by
written notice to Borrower, Requisite Lenders may elect, in their sole
discretion, to rescind and annul the acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Unmatured Event of
Default or impair any right or remedy consequent thereon. The provisions of the
preceding sentence are intended merely to bind Lenders to a decision which may
be made at the election of Requisite Lenders; they are not intended to benefit
Borrower and do not give Borrower the right to require Lenders to rescind or
annul any acceleration hereunder, even if the conditions set forth herein are
met.
ARTICLE XI
AGENCY PROVISIONS
11.1 APPOINTMENT.
11.1.1 Each Lender hereby (i) designates and appoints FNBB as Agent of such
Lender under this Agreement and the Loan Documents, (ii) authorizes and directs
Agent to enter into the Loan Documents other than this Agreement for the benefit
of Lenders, and (iii) authorizes Agent to take such action on its behalf under
the provisions of this Agreement and the Loan Documents and to exercise such
powers as are set forth herein or therein, together with such other powers as
are reasonably incidental thereto, subject to the limitations referred to in
SECTIONS 11.10.1 and 11.10.2. Agent agrees to act as such on the express
conditions contained in this ARTICLE XI.
11.1.2 The provisions of this ARTICLE XI are solely for the benefit of
Agent and Lenders, and Borrower shall not have any rights to rely on or enforce
any of the provisions hereof (other than as expressly set forth in SECTIONS 11.3
and 11.9, PROVIDED, HOWEVER, that the foregoing shall in no way limit Borrower's
obligations under this ARTICLE XI. In performing its functions and duties under
this Agreement, Agent shall act solely as Agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower or any other Person.
11.2 NATURE OF DUTIES. Agent shall not have any duties or responsibilities
except those expressly set forth in this Agreement or in the Loan Documents.
Subject to the provisions of SECTIONS 11.5 and 11.7, Agent shall administer the
Loans in the same manner as it administers its own loans. Promptly following the
effectiveness of this Agreement, Agent shall send to each Lender its originally
executed Note and the executed original, to the extent the same are available in
sufficient numbers, of each other Loan Document other than the Notes in favor of
other Lenders. Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender. Nothing in this Agreement or any of the
Loan Documents, expressed or implied, is intended or shall be construed to
impose upon Agent any obligation in respect of this Agreement or any of the Loan
Documents except as expressly set forth herein or therein. Each Lender shall
make its own independent investigation of the financial condition and affairs of
the REIT, Borrower and each Portfolio Property in connection with the making and
the continuance of the Loans hereunder and shall make its own appraisal of the
creditworthiness of the REIT and Borrower, and, except as specifically provided
herein, Agent shall not have any duty or responsibility, either initially or on
a continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the Closing Date
or at any time or times thereafter.
11.3 LOAN DISBURSEMENTS.
11.3.1 Not later than 1:00 P.M. (Eastern time) on the next Business Day
following receipt of a Notice of Borrowing, Agent shall send a copy thereof by
facsimile to each other Lender and shall otherwise notify each Lender of the
proposed Borrowing and the Funding Date. Each Lender shall make available to
Agent (or the funding bank or entity designated by Agent), the amount of such
Lender's Pro Rata Share of such Borrowing in immediately available funds not
later than the times designated in SECTION 11.3.2. Unless Agent shall have been
notified by any Lender prior to such time for funding in respect of any
Borrowing that such Lender does not intend to make available to Agent such
Lender's Pro Rata Share of such Borrowing, Agent may assume that such Lender has
made such amount available to Agent. In any case where a Lender does not for any
reason make available to Agent such Lender's Pro Rata Share of such Borrowing,
Agent, in its sole discretion, may, but shall not be obligated to, fund to
Borrower such Lender's Pro Rata Share of such Borrowing. If the amount so funded
by Agent is not in fact made available to Agent by the responsible Lender, then
Borrower agrees to repay to Agent such amount, together with interest thereon at
the Base Rate for each day from the date such amount is made available to
Borrower until the date such amount is repaid to Agent, not later than three (3)
Business Days following Agent's demand to Borrower that such repayment be made.
In addition, such Lender agrees to pay to Agent forthwith on demand such
corresponding amount, together with interest thereon at the Federal Funds Rate.
If such Lender shall pay to Agent such corresponding amount, such amount so paid
shall constitute such Lender's Pro Rata Share of such Borrowing, and if both
such Lender and Borrower shall have paid and repaid, respectively, such
corresponding amount, Agent shall promptly return to Borrower such corresponding
amount in same day funds; interest paid by Borrower in respect of such
corresponding amount shall be prorated, as of the date of payment thereof by
such Lender to Agent. In the event that Agent shall not have funded such
Lender's Pro Rata Share under this SECTION 11.3.1, then Borrower shall not be
obligated to accept a late funding of such Lender's Pro Rata Share if such
funding is made more than two (2) Business Days following the applicable Funding
Date. If Borrower declines to accept such delinquent funding, Agent shall
promptly return to such Lender the amount of such funding. Nothing in this
SECTION 11.3.1 shall alter the respective rights and obligations of the parties
hereunder in respect of a Defaulting Lender or a Non-Pro Rata Loan.
11.3.2 Requests by Agent for funding by Lenders of Loans will be made by
telecopy. Each Lender shall make the amount of its Loan available to Agent in
Dollars and in immediately available funds, to such bank and account, as Agent
may designate, not later than 1:00 P.M. (Eastern time) on the Funding Date
designated in the Notice of Borrowing with respect to such Loan, provided that
to the extent the Agent is late in providing any Lender with notice the
applicable time in advance of any Funding Date specified in SECTION 2.1.2(A),
such Lender shall not be obligated to make such amount available to the Agent
until said time on the Business Day which is the same number of Business Days
after the Funding Date as Agent was late in providing such notice.
11.3.3 Nothing in this SECTION 11.3 shall be deemed to relieve any Lender
of its obligation hereunder to make its Pro Rata Share of Loans on any Funding
Date, nor shall any Lender be responsible for the failure of any other Lender to
perform its obligations to make any Loan hereunder, and the Commitment of any
Lender shall not be increased or decreased as a result of the failure by any
other Lender to perform its obligation to make a Loan.
11.4 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS.
11.4.1 Subject to SECTION 11.4.2, payments actually received by Agent for
the account of Lenders shall be paid to them promptly after receipt thereof by
Agent, but in any event within two (2) Business Days, PROVIDED that Agent shall
pay to Lenders interest thereon, at the lesser of (i) Federal Funds Rate and
(ii) the rate of interest applicable to such Loans, from the Business Day
following receipt of such funds by Agent until such funds are paid in
immediately available funds to Lenders. Subject to SECTION 11.4.2, all payments
of principal and interest in respect of outstanding Loans, all payments of the
fees described in this Agreement, and all payments in respect of any other
Obligations shall be allocated among such of Lenders as are entitled thereto, in
proportion to their respective Pro Rata Shares or otherwise as provided herein.
Agent shall promptly distribute, but in any event within two (2) Business Days,
to each Lender at its primary address set forth on the appropriate signature
page hereof or on the Assignment and Assumption, or at such other address as a
Lender may request in writing, such funds as it may be entitled to receive,
PROVIDED that Agent shall in any event not be bound to inquire into or determine
the validity, scope or priority of any interest or entitlement of any Lender and
may suspend all payments and seek appropriate relief (including, without
limitation, instructions from Requisite Lenders or all Lenders, as applicable,
or an action in the nature of interpleader) in the event of any doubt or dispute
as to any apportionment or distribution contemplated hereby. The order of
priority herein is set forth solely to determine the rights and priorities of
Lenders as among themselves and may at any time or from time to time be changed
by Lenders as they may elect, in writing in accordance with SECTION 12.4,
without necessity of notice to or consent of or approval by Borrower or any
other Person. All payments or other sums received by Agent for the account of
Lenders shall not constitute property or assets of Agent and shall be held by
Agent, solely in its capacity as agent for itself and the other Lenders, subject
to the Loan Documents.
11.4.2 Notwithstanding any provision hereof to the contrary, until such
time as a Defaulting Lender has funded its Pro Rata Share of a Loan which was
previously a Non Pro Rata Loan, or all other Lenders have received payment in
full (whether by repayment or prepayment) of the principal and interest due in
respect of such Non Pro Rata Loan, all of the Obligations owing to such
Defaulting Lender hereunder shall be subordinated in right of payment, as
provided in the following sentence, to the prior payment in full of all
principal, interest and fees in respect of all Non Pro Rata Loans in which the
Defaulting Lender has not funded its Pro Rata Share (such principal, interest
and fees being referred to as "Senior Loans"). All amounts paid by Borrower and
otherwise due to be applied to the Obligations owing to the Defaulting Lender
pursuant to the terms hereof shall be distributed by Agent to the other Lenders
in accordance with their respective Pro Rata Shares (recalculated for purposes
hereof to exclude the Defaulting Lender's Commitment), until all Senior Loans
have been paid in full. This provision governs only the relationship among
Agent, each Defaulting Lender, and the other Lenders; nothing hereunder shall
limit the obligation of Borrower to repay all Loans in accordance with the terms
of this Agreement. The provisions of this section shall apply and be effective
regardless of whether an Event of Default occurs and is then continuing, and
notwithstanding (i) any other provision of this Agreement to the contrary, (ii)
any instruction of Borrower as to its desired application of payments or (iii)
the suspension of such Defaulting Lender's right to vote on matters which are
subject to the consent or approval of Requisite Lenders or all Lenders. No
Unused Facility Fee shall accrue in favor of, or be payable to, such Defaulting
Lender from the date of any failure to fund Loans or reimburse Agent for any
Liabilities and Costs as herein provided until such failure has been cured, and
Agent shall be entitled to (1) withhold or setoff, and to apply to the payment
of the defaulted amount and any related interest, any amounts to be paid to such
Defaulting Lender under this Agreement, and (2) bring an action or suit against
such Defaulting Lender in a court of competent jurisdiction to recover the
defaulted amount and any related interest. In addition, the Defaulting Lender
shall indemnify, defend and hold Agent and each of the other Lenders harmless
from and against any and all Liabilities and Costs, plus interest thereon at the
Default Rate, which they may sustain or incur by reason of or as a direct
consequence of the Defaulting Lender's failure or refusal to abide by its
obligations under this Agreement.
11.5 RIGHTS, EXCULPATION, ETC. Neither Agent, any Affiliate of Agent, nor
any of their respective officers, directors, employees, agents, attorneys or
consultants, shall be liable to any Lender for any action taken or omitted by
them hereunder or under any of the Loan Documents, or in connection herewith or
therewith, except that Agent shall be liable for its gross negligence or willful
misconduct. In the absence of gross negligence or willful misconduct, Agent
shall not be liable for any apportionment or distribution of payments made by it
in good faith pursuant to SECTION 11.4, and if any such apportionment or
distribution is subsequently determined to have been made in error the sole
recourse of any Person to whom payment was due, but not made, shall be to
recover from the recipients of such payments any payment in excess of the amount
to which they are determined to have been entitled. Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any of the
other Loan Documents, or any of the transactions contemplated hereby and
thereby; or for the financial condition of the REIT, Borrower or any of their
Affiliates. Agent shall not be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement or any of the Loan Documents or the financial condition of the
REIT, Borrower or any of their Affiliates, or the existence or possible
existence of any Unmatured Event of Default or Event of Default.
11.6 RELIANCE. Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents, telecopies or any telephone
message believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including counsel for
Borrower), independent public accountant and other experts selected by it.
11.7 INDEMNIFICATION. To the extent that Agent is not reimbursed and
indemnified by Borrower, Lenders will reimburse, within ten (10) Business Days
after notice from Agent, and indemnify and defend Agent for and against any and
all Liabilities and Costs (other than losses in the collection of principal and
interest on the Loans which losses shall be shared among all Lenders including
the Agent as provided in SECTIONS 11.4 and 11.13) which may be imposed on,
incurred by, or asserted against it in any way relating to or arising out of
this Agreement or any of the other Loan Documents or any action taken or omitted
by Agent or under this Agreement or any of the other Loan Documents, in
proportion to each Lender's Pro Rata Share; PROVIDED that no Lender shall be
liable for any portion of such Liabilities and Costs resulting from Agent's
gross negligence or willful misconduct or in respect of normal administrative
costs and expenses incurred by Agent (prior to any Event of Default or any
Unmatured Event of Default) in connection with its performance of administrative
duties under this Agreement and the other Loan Documents. The obligations of
Lenders under this SECTION 11.7 shall survive the payment in full of all
Obligations and the termination of this Agreement. In the event that after
payment and distribution of any amount by Agent to Lenders, any Lender or third
party, including Borrower, any creditor of Borrower or a trustee in bankruptcy,
recovers from Agent any amount found to have been wrongfully paid to Agent or
disbursed by Agent to Lenders, then Lenders, in proportion to their respective
Pro Rata Shares, shall reimburse Agent for all such amounts. Notwithstanding the
foregoing, Agent shall not be obligated to advance Liabilities and Costs and may
require the deposit by each Lender of its Pro Rata Share of any material
Liabilities and Costs anticipated by Agent before they are incurred or made
payable.
11.8 AGENT INDIVIDUALLY. With respect to its Pro Rata Share of the
Commitments hereunder and the Loans made by it, Agent shall have and may
exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender. The terms "Lenders", "Requisite Lenders" or any similar terms may
include Agent in its individual capacity as a Lender or one of the Requisite
Lenders. Agent and any Lender and its Affiliates may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other business
with Borrower or any of its Affiliates as if it were not acting as Agent or
Lender pursuant hereto.
11.9 SUCCESSOR AGENT; RESIGNATION OF AGENT; REMOVAL OF AGENT.
11.9.1 Agent may resign from the performance of all its functions and
duties hereunder at any time by giving at least thirty (30) Business Days, prior
written notice to Lenders and Borrower, and shall automatically cease to be
Agent hereunder in the event a petition in bankruptcy shall be filed by or
against Agent or the Federal Deposit Insurance Corporation or any other
Governmental Authority shall assume control of Agent or Agent's interests under
the Facility. Further, Lenders whose aggregate Commitments constitute at least
sixty-six and two- thirds percent (66-2/3%) of the Commitments of all Lenders
excluding the Agent may remove Agent for cause at any time by giving at least
thirty (30) Business Days' prior written notice to Agent, Borrower and all other
Lenders. If Agent enters into one or more assignments pursuant to SECTION 11.12
having the effect of reducing its Commitment to less than $22,500,000 then any
Lender whose Commitment exceeds that of Agent may remove Agent by notice given
within thirty (30) days after such Lender receives notice of the assignments
which reduce the Agent's Commitment below such level. Such resignation or
removal shall take effect upon the acceptance by a successor Agent appointed
pursuant to SECTION 11.9.2 or 11.9.3.
11.9.2 Upon any such notice of resignation by or removal of Agent,
Requisite Lenders shall appoint a successor Agent with the consent of Borrower,
which consent shall not be unreasonably withheld or delayed AND which consent
shall not be required if there shall then exist any Event of Default. Any
successor Agent must be a bank (i) the senior debt obligations of which (or such
bank's parent's senior unsecured debt obligations) are rated not less than BBB
by one of the Rating Agencies and (ii) which has total assets in excess of Ten
Billion Dollars ($10,000,000,000). Such successor Agent shall separately confirm
in writing with Borrower the fee to be paid to such Agent pursuant to SECTION
2.5.2.
11.9.3 If a successor Agent shall not have been so appointed within said
thirty (30) Business Day period, the retiring or removed Agent, shall then
appoint a successor Agent who shall meet the requirements described in SECTION
11.9.2 and who shall serve as Agent until such time, if any, as Requisite
Lenders, appoint a successor Agent as provided above.
11.10 CONSENT AND APPROVALS.
11.10.1 Each of the following shall require the approval or consent of
Requisite Lenders:
(a) Approval of notes receivable pursuant to definition of Adjusted
Asset Value (SECTION 1.1);
(b) Consent to Indebtedness (SECTION 8.10);
(c) Approval of additional executives upon a Discontinuity in
Management (SECTION 8.12);
(d) Acceleration following an Event of Default (SECTION 10.2.1) or
rescission of such acceleration (SECTION 10.3);
(e) Approval of the exercise of rights and remedies under the Loan
Documents following an Event of Default (SECTION 10.2.1);
(f) Appointment of a successor Agent (SECTION 11.9);
(g) Except as referred to in SECTION 11.10.2 or 11.11.1, approval
of any amendment, modification or termination of this Agreement, or
waiver of any provision herein (SECTION 12.4).
11.10.2 Each amendment, modification or waiver specifically enumerated in
SECTION 12.4.1 shall require the consent of all Lenders.
11.10.3 In addition to the required consents or approvals referred to in
SECTION 11.10.1, Agent may at any time request instructions from Requisite
Lenders with respect to any actions or approvals which, by the terms of this
Agreement or of any of the Loan Documents, Agent is permitted or required to
take or to grant without instructions from any Lenders, and if such instructions
are promptly requested, Agent shall be absolutely entitled to refrain from
taking any action or to withhold any approval and shall not be under any
liability whatsoever to any Person for refraining from taking any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from Requisite Lenders. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting under this Agreement or any
of the other Loan Documents in accordance with the instructions of Requisite
Lenders or, where applicable, all Lenders. Agent shall promptly notify each
Lender at any time that the Requisite Lenders have instructed Agent to act or
refrain from acting pursuant to this SECTION 11.10.3.
11.10.4 Each Lender agrees that any action taken by Agent at the direction
or with the consent of Requisite Lenders in accordance with the provisions of
this Agreement or any Loan Document, and the exercise by Agent at the direction
or with the consent of Requisite Lenders of the powers set forth herein or
therein, together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all Lenders, except for actions
specifically requiring the approval of all Lenders. All communications from
Agent to Lenders requesting Lenders' determination, consent, approval or
disapproval (i) shall be given in the form of a written notice to each Lender,
(ii) shall be accompanied by a description of the matter or thing as to which
such determination, approval, consent or disapproval is requested, or shall
advise each Lender where such matter or thing may be inspected, or shall
otherwise describe the matter or issue to be resolved, (iii) shall include, if
reasonably requested by a Lender and to the extent not previously provided to
such Lender, written materials and a summary of all oral information provided to
Agent by Borrower in respect of the matter or issue to be resolved, and (iv) may
include Agent's recommended course of action or determination in respect
thereof. Each Lender shall reply promptly, but in any event within ten (10)
Business Days (the "LENDER REPLY PERIOD"). Unless a Lender shall give written
notice to Agent that it objects to the recommendation or determination of Agent
(together with a written explanation of the reasons behind such objection)
within the Lender Reply Period, such Lender shall be deemed to have approved of
or consented to such recommendation or determination. With respect to decisions
requiring the approval of Requisite Lenders or all Lenders, Agent shall submit
its recommendation or determination for approval of or consent to such
recommendation or determination to all Lenders and upon receiving the required
approval or consent shall follow the course of action or determination
recommended to Lenders by Agent or such other course of action recommended by
Requisite Lenders, and each non-responding Lender shall be deemed to have
concurred with such recommended course of action.
11.11 AGENCY PROVISIONS RELATING TO CERTAIN ENFORCEMENT ACTIONS.
11.11.1 Agent is hereby authorized on behalf of all Lenders, without the
necessity of any notice to or further consent from any Lender, to waive the
imposition of late fees provided for in SECTION 2.4.5 up to a maximum of three
(3) times during the term of this Agreement.
11.11.2 Should Agent (i) employ counsel for advice or other representation
(whether or not any suit has been or shall be filed) with respect to any of the
Loan Documents, or (ii) commence any proceeding or in any way seek to enforce
its rights or remedies under the Loan Documents, each Lender, upon demand
therefor from time to time, shall contribute its share (based on its Pro Rata
Share) of the reasonable costs and/or expenses of any such advice or other
representation, enforcement or acquisition, including, but not limited to, fees
of receivers, court costs and fees and expenses of attorneys to the extent not
otherwise reimbursed by Borrower; PROVIDED that Agent shall not be entitled to
reimbursement of its attorneys' fees and expenses incurred in connection with
the resolution of disputes between Agent and other Lenders unless Agent shall be
the prevailing party in any such dispute. Any loss of principal and interest
resulting from any Event of Default shall be shared by Lenders in accordance
with their respective Pro Rata Shares.
11.12 ASSIGNMENTS AND PARTICIPATIONS.
11.12.1 Each Lender may assign, to one or more Eligible Assignees, all or a
portion of its rights and obligations under this Agreement (including without
limitation all or a portion of its Commitment and the Loans owing to it) and
other Loan Documents; PROVIDED, HOWEVER, that (i) each such assignment shall be
of a constant, and not a varying, percentage of the assigning Lender's rights
and obligations under this Agreement and other Loan Documents, and the
assignment shall cover the same percentage of such Lender's Commitment and
Loans, (ii) unless Agent and Borrower otherwise consent (except that after an
Event of Default only the consent of Agent shall be required), the aggregate
amount of the Commitment of the assigning Lender being assigned pursuant to each
such assignment (determined as of the date of the Assignment and Assumption with
respect to such assignment) shall in no event be less than Ten Million Dollars
($10,000,000) and shall be an integral multiple of One Million Dollars
($1,000,000), (iii) after giving effect to such assignment, the aggregate amount
of the Commitment retained by the assigning Lender shall in no event be less
than Twelve Million Dollars ($12,000,000), (iv) the parties to each such
assignment shall execute and deliver to Agent, for its approval and acceptance,
an Assignment and Assumption, and (v) Agent shall receive from the assignor a
processing fee of Three Thousand Dollars ($3,000). Upon such execution,
delivery, approval and acceptance, and upon the effective date specified in the
applicable Assignment and Assumption, (X) the assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Assumption, have the rights and
obligations of a Lender hereunder, and (Y) the assigning Lender thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Assumption, relinquish its rights and be
released from its obligations under this Agreement.
11.12.2 By executing and delivering an Assignment and Assumption, the
assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Assumption, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document or any other instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the REIT or Borrower
or the performance or observance by the REIT or Borrower of any of their
respective obligations under any Loan Document or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in ARTICLE V or delivered pursuant to ARTICLE VI to the
date of such assignment and such other Loan Documents and other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption; (iv) such assignee will,
independently and without reliance upon Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee appoints and
authorizes Agent to take such action as Agent on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are delegated to
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
11.12.3 Agent shall maintain, at its address referred to on the counterpart
signature pages hereof, a copy of each Assignment and Assumption delivered to
and accepted by it and shall record in the Loan Account the names and addresses
of each Lender and the Commitment of, and principal amount of the Loans owing
to, such Lender from time to time. Borrower, Agent and Lenders may treat each
Person whose name is recorded in the Loan Account as a Lender hereunder for all
purposes of this Agreement.
11.12.4 Upon its receipt of an Assignment and Assumption executed by an
assigning Lender and an assignee, Agent shall, if such Assignment and Assumption
has been properly completed and is in substantially the form of EXHIBIT A, (i)
accept such Assignment and Assumption, (ii) record the information contained
therein in the Loan Account, and (iii) give prompt notice thereof to Borrower.
Upon request, Borrower will execute and deliver to Agent an appropriate
replacement promissory note or replacement promissory notes in favor of each
assignee (and assignor, if such assignor is retaining a portion of its
Commitment and Loans) reflecting such assignee's (and assigner's) Pro Rata
Share(s) of the Facility. Upon execution and delivery of such replacement
promissory notes the original promissory note or notes evidencing all or a
portion of the Commitments and Loans being assigned shall be cancelled and
returned to Borrower.
11.12.5 Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including without limitation all or a portion of its Commitment and
the Loans owing to it) and other Loan Documents; PROVIDED, HOWEVER, that (i)
such Lender's obligations under this Agreement (including without limitation its
Commitment to Borrower hereunder) shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) Borrower, Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and with regard to any and all
payments to be made under this Agreement, and (iv) the holder of any such
participation shall not be entitled to voting rights under this Agreement except
for voting rights with respect to (A) increases in the Facility; (B) extensions
of the Termination Date; and (C) decreases in the interest rates described in
this Agreement. No participant shall be entitled to vote on any matter until the
Lender with which such participant is participating in the Facility and the
Loans confirms such participant's status as a participant hereunder.
11.12.6 Borrower will use reasonable efforts to cooperate with Agent and
Lenders in connection with the assignment of interests under this Agreement or
the sale of participations herein.
11.12.7 Anything in this Agreement to the contrary notwithstanding, and
without the need to comply with any of the formal or procedural requirements of
this Agreement, including this SECTION 11.12, any Lender may at any time and
from time to time pledge and assign all or any portion of its rights under all
or any of the Loan Documents to a Federal Reserve Bank; PROVIDED that no such
pledge or assignment shall release such Lender from its obligations thereunder.
To facilitate any such pledge or assignment, Agent shall, at the request of such
Lender, enter into a letter agreement with the Federal Reserve Bank in
substantially the form of the exhibit to Appendix C to the Federal Reserve Bank
of New York Operating circular No. 12.
11.12.8 Anything in this Agreement to the contrary notwithstanding, any
Lender may assign all or any portion of its rights and obligations under this
Agreement to another branch or Affiliate of such Lender, PROVIDED that (i) at
the time of such assignment such Lender is not a Defaulting Lender, (ii) such
Lender gives Agent and Borrower at least fifteen (15) days' prior written notice
of any such assignment, (iii) the parties to each such assignment execute and
deliver to Agent an Assignment and Assumption, and (iv) Agent receives from
assignor a processing fee of Three Thousand Dollars ($3,000).
11.12.9 No assignee of any rights and obligations under this Agreement
shall be permitted to subassign such rights and obligations.
11.12.10 No Lender shall be permitted to assign or sell all or any portion
of its rights and obligations under this Agreement to Borrower or any Affiliate
of Borrower.
11.13 RATABLE SHARING. Subject to SECTIONS 11.3 and 11.4, Lenders agree
among themselves that (i) with respect to all amounts received by them which are
applicable to the payment of the Obligations, equitable adjustment will be made
so that, in effect, all such amounts will be shared among them ratably in
accordance with their Pro Rata Shares, whether received by voluntary payment, by
counterclaim or cross action or by the enforcement of any or all of the
Obligations, (ii) if any of them shall by voluntary payment or by the exercise
of any right of counterclaim or otherwise, receive payment of a proportion of
the aggregate amount of the Obligations held by it which is greater than its Pro
Rata Share of the payments on account of the Obligations, the one receiving such
excess payment shall purchase, without recourse or warranty, an undivided
interest and participation (which it shall be deemed to have done simultaneously
upon the receipt of such payment) in such Obligations owed to the others so that
all such recoveries with respect to such Obligations shall be applied ratably in
accordance with their Pro Rata Shares; PROVIDED, that if all or part of such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to that party to the extent necessary to adjust
for such recovery, but without interest except to the extent the purchasing
party is required to pay interest in connection with such recovery. Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this SECTION 11.13 may, to the fullest extent permitted by law,
exercise all its rights of payment with respect to such participation as fully
as if such Lender were the direct creditor of Borrower in the amount of such
participation.
11.14 DELIVERY OF DOCUMENTS. Agent shall as soon as reasonably practicable
distribute to each Lender at its primary address set forth on the appropriate
counterpart signature page hereof, or at such other address as a Lender may
request in writing, (i) all documents to which such Lender is a party or of
which such Lender is a beneficiary set forth in SECTION 4.1, (ii) all documents
of which Agent receives copies from Borrower pursuant to SECTIONS 6.1 and 12.6,
(iii) all other documents or information which Agent is required to send to
Lenders pursuant to the terms of this Agreement; (iv) other information or
documents received by Agent at the request of any Lender, and (v) all notices
received by Agent pursuant to SECTION 6.2. In addition, within fifteen (15)
Business Days after receipt of a request in writing from a Lender for written
information or documents provided by or prepared by Borrower or the REIT, Agent
shall deliver such written information or documents to such requesting Lender if
Agent has possession of such written information or documents in its capacity as
Agent or as a Lender.
11.15 NOTICE OF EVENTS OF DEFAULT. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Unmatured Event of Default or Event
of Default (other than nonpayment of principal of or interest on the Loans)
unless Agent has received notice in writing from a Lender or Borrower referring
to this Agreement or the other Loan Documents, describing such event or
condition and expressly stating that such notice is a notice of an Unmatured
Event of Default or Event of Default. Should Agent receive such notice of the
occurrence of an Unmatured Event of Default or Event of Default, or should Agent
send Borrower a notice of Unmatured Event of Default or Event of Default, Agent
shall promptly give notice thereof to each Lender.
ARTICLE XII
MISCELLANEOUS
12.1 EXPENSES.
12.1.1 GENERALLY. Borrower agrees upon demand to pay, or reimburse Agent
for, all of Agent's external audit, legal and investigation expenses and for all
other reasonable out-of- pocket costs and expenses of every type and nature
(including, without limitation, the reasonable fees, expenses and disbursements
of Agent's internal appraisers, environmental advisors or legal counsel)
incurred by Agent at any time (whether prior to, on or after the date of this
Agreement) in connection with (i) its own audit and investigation of Borrower
and the Portfolio Properties provided that prior to an Event of Default Borrower
shall not be required to reimburse expenses for any inspections of the Portfolio
Properties by Agent's loan officers or other employees which are made more
frequently than annually; (ii) the negotiation, preparation and execution of
this Agreement (including, without limitation, the satisfaction or attempted
satisfaction of any of the conditions set forth in ARTICLE IV) and the other
Loan Documents and the making of the Loans; (iii) administration of this
Agreement, the other Loan Documents and the Loans, including, without
limitation, consultation with attorneys in connection therewith; and (iv) the
protection, collection or enforcement of any of the Obligations.
12.1.2 AFTER EVENT OF DEFAULT. Borrower further agrees to pay, or reimburse
Agent and Lenders, for all reasonable out-of-pocket costs and expenses,
including without limitation reasonable attorneys' fees and disbursements
incurred by Agent or Lenders after the occurrence of an Event of Default (i) in
enforcing any Obligation or exercising or enforcing any other right or remedy
available by reason of such Event of Default; (ii) in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (iii) in commencing, defending or intervening in any litigation or
in filing a petition, complaint, answer, motion or other pleadings in any legal
proceeding relating to Borrower, the REIT or any Affiliate and related to or
arising out of the transactions contemplated hereby; or (iv) in taking any other
action in or with respect to any suit or proceeding (whether in bankruptcy or
otherwise).
12.2 INDEMNITY. Borrower further agrees to defend, protect, indemnify and
hold harmless Agent, each and all of the Lenders, each of their respective
Affiliates and participants and each of the respective officers, directors,
employees, agents, attorneys and consultants (including, without limitation,
those retained in connection with the satisfaction or attempted satisfaction of
any of the conditions set forth in ARTICLE IV) of each of the foregoing
(collectively called the "INDEMNITEES") from and against any and all Liabilities
and Costs imposed on, incurred by, or asserted against such Indemnitees (whether
based on any federal or state laws or other statutory regulations, including,
without limitation, securities and commercial laws and regulations, under common
law or in equity, and based upon contract or otherwise, including any
Liabilities and Costs arising as a result of a "prohibited transaction" under
ERISA to the extent arising from or in connection with the past, present or
future operations of the REIT or Borrower or their respective predecessors in
interest) in any manner relating to or arising out of this Agreement or the
other Loan Documents, or any act, event or transaction related or attendant
thereto, the making of and participation in the Loans and the management of the
Loans, or the use or intended use of the proceeds of the Loans (collectively,
the "INDEMNIFIED MATTERS"); PROVIDED, HOWEVER, that Borrower shall have no
obligation to an Indemnitee hereunder with respect to (i) matters for which such
Indemnitee has been compensated pursuant to or for which an exemption is
provided in SECTION 2.4.7 or any other provision of this Agreement, (ii)
Indemnified Matters to the extent caused by or resulting from the willful
misconduct or gross negligence of that Indemnitee, as determined by a court of
competent jurisdiction, and (iii) Indemnified Matters arising from any dispute
among the Lenders not attributable to the actions or omissions of Borrower or
the REIT. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in the preceding sentence may be unenforceable because it is violative
of any law or public policy, Borrower shall contribute the maximum portion which
it is permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees.
12.3 CHANGE IN ACCOUNTING PRINCIPLES. Except as otherwise provided herein,
if any changes in accounting principles from those used in the preparation of
the most recent financial statements delivered to Agent pursuant to the terms
hereof are hereinafter required or permitted by the rules, regulations,
pronouncements and opinions of the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or successors thereto or
agencies with similar functions) and are adopted by the REIT or Borrower with
the agreement of its independent certified public accountants and such changes
result in a change in the method of calculation of any of the financial
covenants, standards or terms found herein, the parties hereto agree to enter
into negotiations in order to amend such provisions so as to equitably reflect
such changes with the desired result that the criteria for evaluating the
financial condition of the REIT or Borrower shall be the same after such changes
as if such changes had not been made; PROVIDED, HOWEVER, that no change in GAAP
that would affect the method of calculation of any of the financial covenants,
standards or terms shall be given effect in such calculations until such
provisions are amended pursuant to SECTION 12.4, to so reflect such change in
accounting principles.
12.4 AMENDMENTS AND WAIVERS. (i) No amendment or modification of any
provision of this Agreement shall be effective without the written agreement of
Requisite Lenders (after notice to all Lenders) and Borrower (except for
amendments to SECTION 11.4.1 which do not require the consent of Borrower), and
(ii) no termination or waiver of any provision of this Agreement, or consent to
any departure by Borrower therefrom (except as expressly provided in SECTION
11.11.1 with respect to waivers of late fees), shall in any event be effective
without the written concurrence of Requisite Lenders (after notice to all
Lenders), which Requisite Lenders shall have the right to grant or withhold at
their sole discretion, EXCEPT THAT:
12.4.1 The following amendments, modifications or waivers shall require the
consent of all Lenders:
(a) increasing the Commitments or Lender's Commitments, or
increasing the Facility as provided in SECTION 2.10;
(b) changing the principal amount or final maturity of the Loans;
(c) reducing the interest rates applicable to the Loans;
(d) reducing the rates on which fees payable pursuant hereto are
determined;
(e) forgiving or delaying any amount payable or receivable under
ARTICLE II (other than late fees);
(f) changing the definition of "Requisite Lenders", "Pro Rata
Shares" or "Event of Default";
(g) changing any provision contained in this SECTION 12.4;
(h) releasing any obligor or guarantor under any Loan Document or
amending the Guaranty to reduce the guarantor's liability thereunder;
(i) consent to assignment by Borrower of all of its duties and
Obligations hereunder pursuant to SECTION 12.14; or
(j) changing any of the financial covenants set forth in ARTICLE IX
or any of the definitions used in the computation of such covenants or
waiving any failure of the Borrower to comply with any one of such
covenants for two or more consecutive Fiscal Quarters.
12.4.2 No amendment, modification, termination or waiver of any provision
of ARTICLE XI or any other provision referring to Agent shall be effective
without the written concurrence of Agent, but only if such amendment,
modification, termination or waiver alters the obligations or rights of Agent.
Any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No notice to or demand on Borrower
in any case shall entitle Borrower to any other further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this SECTION 12.4 shall be binding on
each assignee, transferee or recipient of Agent's or any Lender's Commitment
under this Agreement or the Loans at the time outstanding.
12.5 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of an Event of Default or Unmatured Event of Default if such
action is taken or condition exists, and if a particular action or condition is
expressly permitted under any covenant, unless expressly limited to such
covenant, the fact that it would not be permitted under the general provisions
of another covenant shall not constitute an Event of Default or Unmatured Event
of Default if such action is taken or condition exists.
12.6 NOTICES AND DELIVERY. Unless otherwise specifically provided herein,
any consent, notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telecopied or sent by
courier service or United States mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy (or
on the next Business Day if such telecopy is received on a non-Business Day or
after 5:00 p.m. (at the office of the recipient) on a Business Day) or four (4)
Business Days after deposit in the United States mail (registered or certified,
with postage prepaid and properly addressed). Notices to Agent pursuant to
ARTICLE II shall not be effective until received by Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this SECTION 12.6) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to all of the
other parties. All deliveries to be made to Agent for distribution to the
Lenders shall be made to Agent at the addresses specified for notice on the
signature page hereto and in addition, a sufficient number of copies of each
such delivery shall be delivered to Agent for delivery to each Lender at the
address specified for deliveries on the signature page hereto or such other
address as may be designated by Agent in a written notice.
12.7 SURVIVAL OF WARRANTIES, INDEMNITIES AND AGREEMENTS. All agreements,
representations, warranties and indemnities made or given herein shall survive
the execution and delivery of this Agreement and the other Loan Documents and
the making and repayment of the Loans hereunder and such indemnities shall
survive termination hereof.
12.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of Agent or any Lender in the exercise of any power, right or
privilege under any of the Loan Documents shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under the Loan Documents are
cumulative to and not exclusive of any rights or remedies otherwise available.
12.9 PAYMENTS SET ASIDE. To the extent that Borrower makes a payment or
payments to Agent or the Lenders or Agent or the Lenders exercise their rights
of setoff, and such payment or payments or the proceeds of such setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the Obligation or part
thereof originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred.
12.10 SEVERABILITY. In case any provision in or obligation under this
Agreement or the other Loan Documents shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby, PROVIDED,
HOWEVER, that if the rates of interest or any other amount payable hereunder, or
the collectibility thereof, are declared to be or become invalid, illegal or
unenforceable, Lenders' obligations to make Loans shall not be enforceable.
12.11 HEADING. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
12.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS.
12.13 LIMITATION OF LIABILITY. To the extent permitted by applicable law,
no claim may be made by Borrower, any Lender or any other Person against Agent,
Co-Agent or any Lender, or the affiliates, directors, officers, employees,
attorneys or agents of any of them, for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this Agreement, or any act, omission or event occurring in connection
therewith; and Borrower and each Lender hereby waive, release and agree not to
sue upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
12.14 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents
shall be binding upon the parties hereto and their respective successors and
assigns and shall inure to the benefit of the parties hereto and the successors
and permitted assigns of Agent and Lenders. The terms and provisions of this
Agreement shall inure to the benefit of any assignee or transferee of the Loans
and the Commitments of Lenders under this Agreement, and in the event of such
transfer or assignment, the rights and privileges herein conferred upon Agent
and Lenders shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof. Borrower's rights or
any interest therein hereunder, and Borrower's duties and Obligations hereunder,
shall not be assigned without the consent of all Lenders.
12.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL
AND CERTAIN DAMAGE CLAIMS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE, AND ALL
JUDICIAL PROCEEDINGS BROUGHT BY BORROWER WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT SHALL BE, BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION HAVING SITUS WITHIN THE COMMONWEALTH OF MASSACHUSETTS, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER ACCEPTS, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL
JUDGMENT RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE.
BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS
SPECIFIED ON THE SIGNATURE PAGES HEREOF. BORROWER, AGENT AND LENDERS EACH
IRREVOCABLY WAIVES (i) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND (ii) ANY OBJECTION (INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. EXCEPT TO THE EXTENT EXPRESSLY
PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY ACTION OR PROCEEDING REFERRED TO IN THE PRECEDING SENTENCE ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL DAMAGES, INCLUDING ANY DAMAGES PURSUANT TO M.G.L.
C.93A ET SEQ. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO
BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
12.16 COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES. This Agreement and any
amendments, waivers, consents or supplements may be executed in counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such together shall constitute but one and the same instrument. This
Agreement shall become effective as of the Effective Date when Borrower, the
initial Lenders and Agent have duly executed and delivered execution pages of
this Agreement to each other (delivery by Borrower to Lenders and by any Lender
to Borrower and any other Lender being deemed to have been made by delivery to
Agent) and all conditions set forth in SECTION 4.1 have been satisfied. Agent
shall send written confirmation of the Effective Date to Borrower and each other
Lender promptly following the occurrence thereof. This Agreement and each of the
other Loan Documents shall be construed to the extent reasonable to be
consistent one with the other, but to the extent that the terms and conditions
of this Agreement are actually and directly inconsistent with the terms and
conditions of any other Loan Document, this Agreement shall govern.
12.17 CONSTRUCTION. The parties acknowledge that each party and its counsel
have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or exhibits hereto.
12.18 OBLIGATIONS UNSECURED. It is the intent of the parties that the
Obligations shall constitute unsecured obligations of Borrower. Neither the
restrictions and prohibitions set forth herein with respect to the creation,
incurrence, assumption or existence of any Lien on any Property of Borrower or
any other Person, nor those set forth in any other Loan Document, are intended
to create or constitute a Lien of any nature upon any Property of Borrower or
any other Person, and no such restriction or prohibition shall be deemed to
constitute any such Lien. This SECTION 12.18 shall not be deemed to prevent the
Agent or any Lender from obtaining a Lien as security for the Obligations at any
time hereafter pursuant to a mutual agreement among the parties hereto expressly
providing for such Lien or during the continuance of any Event of Default.
12.19 ENTIRE AGREEMENT. This Agreement, taken together with all of the
other Loan Documents and all certificates and other documents delivered by
Borrower to Agent (including documents incorporating separate agreements
relating to the payment of fees), embodies the entire agreement and supersede
all prior agreements, written and oral, relating to the subject matter hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed on the date set
forth above.
BORROWER: CHELSEA GCA REALTY PARTNERSHIP, L.P., a Delaware limited
partnership
By: CHELSEA GCA REALTY, INC., a Maryland corporation,
its general partner
By____________________________
Its_________________________
ADDRESS FOR NOTICE AND DELIVERY:
103 Eisenhower Parkway
Roseland, NJ 07068
Attn: Denise M. Elmer
Vice President and
General Counsel
Tel: (201)228-6111
Fax: (210)228-3891
AGENT/LENDER: THE FIRST NATIONAL BANK OF BOSTON
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address:
115 Perimeter Center Place N.E.
Suite 500
Atlanta, GA 30346
Attn: Lori Y. Litow
Telephone: (770) 390-6544
Telecopy: (770) 390-8434
Pro Rata Share: 25%
Loan Commitment: $25,000,000
LIBOR OFFICE:
Address:
115 Perimeter Center Place N.E.
Suite 500
Atlanta, GA 30346
Attn: Sandy Wheeler
Telephone: (770) 390-6571
Telecopy: (770) 390-8434
LENDER: WELLS FARGO BANK, National Association (successor to
Wells Fargo Realty Advisors
Funding, Incorporated, a
Colorado corporation)
By:_________________________
Erin P. Peart
Vice President
ADDRESS FOR NOTICE AND DELIVERY:
Address:
2020 K Street, N.W.
Suite 420
Washington, DC 20006
Attn: Erin P. Peart
Telephone: (202) 296-5577
Telecopy: (202) 296-6036
with a copy to:
Wells Fargo Bank
Real Estate Group
420 Montgomery Street
San Francisco, CA 94104
Pro Rata Share: 22.5%
Loan Commitment: $22,500,000
LIBOR OFFICE:
Address:
2020 K Street, N.W.
Suite 420
Washington, DC 20006
Attn: Erin P. Peart
Telephone: (202) 296-5577
Telecopy: (202) 296-6036
LENDER: KEYBANK NATIONAL ASSOCIATION
(successor to Society National
Bank)
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address:
127 Public Square
Cleveland, OH 44114
Attn: Michelle Ludtke
Telephone: (216) 689-8269
Telecopy: (216) 689-3566
Pro Rata Share: 22.5%
Loan Commitment: $22,500,000
LIBOR OFFICE:
Address:
127 Public Square
Cleveland, OH 44114
Attn: Michelle Ludtke
Telephone: (216) 689-8269
Telecopy: (216) 689-3566
LENDER: FIRST AMERICAN BANK, SSB
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address:
14651 Dallas Parkway
Suite 400
Dallas, TX 75240
Attn: Jeff Schultz
Telephone: (214) 419-3410
Telecopy: (214) 419-3308
Pro Rata Share: 18%
Loan Commitment: $18,000,000
LIBOR OFFICE:
Address:
14651 Dallas Parkway
Suite 400
Dallas, TX 75240
Attn: Jeff Schultz
Telephone: (214) 419-3410
Telecopy: (214) 419-3308
LENDER: TOKAI BANK OF CALIFORNIA
By_________________________________
Its______________________________
ADDRESS FOR NOTICE AND DELIVERY:
Address:
505 Montgomery Street
San Francisco, CA
Attn: Richard A. Israel
Telephone: (415) 399-0699
Telecopy: (415) 291-8187
Pro Rata Share: 12%
Loan Commitment: $12,000,000
LIBOR OFFICE:
Address:
505 Montgomery Street
San Francisco, CA
Attn: Richard A. Israel
Telephone: (415) 399-0699
Telecopy: (415) 291-8187
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement Form
S-8 (No. 33-99216) and Forms S-3 (Nos. 33-88670 and 33-93812) of Chelsea GCA
Realty, Inc. and Form S-3 (No. 33-98136) of Chelsea GCA Realty, Inc. and Chelsea
GCA Realty Partnership, L.P. and in the related Prospectus of our report dated
February 12, 1997, with respect to the consolidated financial statements and
schedule of Chelsea GCA Realty, Inc. included in this Annual Report (Form 10-K)
for the year ended December 31, 1996.
Ernst & Young LLP
New York, New York
February 12, 1997
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