<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ____________
COMMISSION FILE NUMBER 1-12566
----------------
G & L REALTY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 95-4449388
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
439 N. BEDFORD DRIVE
BEVERLY HILLS, CALIFORNIA 90210
(Address of Principal Executive (Zip Code)
Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 273-9930
----------------
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 [ ]
The number of shares outstanding of the Registrant's Common Stock as
of August 8, 1997 was 4,005,700 shares.
================================================================================
<PAGE>
G&L REALTY CORP.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1997 (unaudited) and December 31, 1996 3
Condensed Consolidated Statements of Operations for
the Three Month and the Six Month Periods Ended
June 30, 1997 and 1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for
the Six Month Periods Ended June 30, 1997 and 1996 (unaudited) 5 - 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7 - 13
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 14 - 18
Part II Other Information
Item 1 Legal Proceedings 19
Item 2 Changes in Securities 19
Item 3 Defaults Upon Senior Securities 19
Item 4 Submission of Matters to a Vote of Security Holders 19 - 20
Item 5 Other Information 20
Item 6 Exhibits and Reports on Form 8-K 20
Signature 21
Exhibit Index 22
</TABLE>
Page 2
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Rental properties:
Land $ 17,096,000 $ 17,096,000
Buildings and improvements, net 75,311,000 76,135,000
------------ ------------
Total rental properties 92,407,000 93,231,000
Cash and restricted cash 2,153,000 2,232,000
Other receivables, net 1,523,000 682,000
Tenant rent and reimbursements receivable, net 983,000 1,048,000
Unbilled rent receivable, net 1,616,000 1,477,000
Investments in unconsolidated affiliates 8,782,000 ---
Mortgage loans and bonds receivable, net 27,828,000 14,358,000
Assets available for sale 312,000 20,523,000
Deferred charges and other assets, net 2,414,000 2,445,000
------------ ------------
TOTAL ASSETS $138,018,000 $135,996,000
============ ============
LIABILITIES AND STOCKHOLDERS'EQUITY
- -----------------------------------
Liabilities:
Notes payable $ 77,590,000 $109,025,000
Accounts payable and other liabilities 1,180,000 1,462,000
Distributions payable 1,621,000 1,642,000
Tenant security deposits 1,044,000 1,034,000
------------ ------------
Total liabilities 81,435,000 113,163,000
Commitments and contingencies --- ---
Minority interest in consolidated partnership (2,664,000) (2,718,000)
Minority interest in Operating Partnership 3,016,000 3,103,000
Stockholders' equity:
Preferred shares - $.01 par value, 10,000,000 shares
authorized, 1,495,000 shares of 10.25% Series A
Cumulative issued and outstanding as of 6/30/97 and
12/31/96 respectively 15,000 ---
Common shares - $.01 par value, 50,000,000 shares
authorized, 4,005,700 and 4,062,500 shares issued and
outstanding as of 6/30/97 and 12/31/96 respectively 40,000 41,000
Additional paid-in capital 58,186,000 23,710,000
Distributions in excess of net income (2,010,000) (1,303,000)
------------ ------------
Total stockholders' equity 56,231,000 22,448,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $138,018,000 $135,996,000
============ ============
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 3
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month For the Six Month
Period Ended June 30, Period Ended June 30,
1997 1996 1997 1996
-------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Rental $4,319,000 $ 3,652,000 $ 8,565,000 $ 7,673,000
Tenant reimbursements 146,000 118,000 395,000 257,000
Parking 358,000 288,000 718,000 633,000
Interest, loan fees and related income 808,000 1,626,000 2,383,000 3,271,000
Other 28,000 138,000 137,000 225,000
---------- ----------- ----------- -----------
Total revenues 5,659,000 5,822,000 12,198,000 12,059,000
---------- ----------- ----------- -----------
EXPENSES:
Property operations 1,501,000 1,204,000 3,167,000 2,464,000
Depreciation and amortization 962,000 840,000 1,878,000 1,657,000
Interest 1,834,000 2,081,000 4,173,000 4,297,000
General and administrative 529,000 521,000 1,007,000 923,000
Loss on disposition of rental property --- 4,874,000 --- 4,874,000
---------- ----------- ----------- -----------
Total expenses 4,826,000 9,520,000 10,225,000 14,215,000
---------- ----------- ----------- -----------
Income (loss) from operations 833,000 (3,698,000) 1,973,000 (2,156,000)
Equity in earnings of unconsolidated affiliates 609,000 --- 741,000 ---
Minority interest in consolidated partnership (24,000) (35,000) (54,000) (72,000)
Minority interest in Operating Partnership (136,000) 380,000 (272,000) 227,000
---------- ----------- ----------- -----------
Net income (loss) before extraordinary gain 1,282,000 (3,353,000) 2,388,000 (2,001,000)
Extraordinary gain on retirement of debt --- 9,311,000 --- 9,311,000
---------- ----------- ----------- -----------
Net income $1,282,000 $ 5,958,000 $ 2,388,000 $ 7,310,000
========== =========== =========== ===========
Per share data:
Before extraordinary gain $0.31 $(0.82) $0.58 $(0.49)
Extraordinary gain --- 2.29 --- 2.29
---------- ----------- ----------- -----------
Net income $0.31 $1.47 $0.58 $1.80
========== =========== =========== ===========
Weighted average number of outstanding shares 4,102,000 4,063,000 4,139,000 4,062,000
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 4
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
1997 1996
----------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,388,000 $ 7,310,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary gain on retirement of debt --- (9,311,000)
Loss on disposition of rental property --- 4,874,000
Depreciation and amortization 1,878,000 1,657,000
Minority interests 326,000 (155,000)
Undistributed equity in income from affiliates (574,000) ---
Gain on sale of assets held for sale (556,000) ---
Unbilled rent receivable, net (139,000) 148,000
Allowance for doubtful notes and accounts receivable 212,000 96,000
(Increase) decrease in:
Other receivables (736,000) (342,000)
Tenant rent and reimbursements receivable 108,000 66,000
Prepaid expense and other assets (372,000) (163,000)
Accrued interest receivable and loan fees 192,000 (300,000)
Increase (decrease) in:
Accounts payable and other liabilities (282,000) (180,000)
Tenant security deposits 10,000 16,000
------------ ------------
Net cash provided by operating activities 2,455,000 3,716,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to rental properties (613,000) (944,000)
Purchase of rental properties --- (1,274,000)
Proceeds from sale (acquisition) of assets available for sale 4,520,000 (3,005,000)
Pre-acquisition costs --- (812,000)
Return of pre-acquisition deposits 17,000 1,115,000
Leasing commissions (42,000) (67,000)
Investment in notes and bonds receivable (net) (14,208,000) (10,377,000)
Investments in affiliates (5,580,000) ---
------------ ------------
Net cash used in investing activities (15,906,000) (15,364,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable proceeds 16,228,000 31,800,000
Repayment of notes payable (33,663,000) (14,687,000)
Deferred financing costs (208,000) (1,096,000)
Sale (purchase) of preferred stock and preferred partnership units 35,415,000 ---
Sale (purchase) of common stock and partnership units (925,000) 4,000
Distributions (3,475,000) (2,907,000)
------------ ------------
Net cash provided by financing activities 13,372,000 13,114,000
------------ ------------
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH (79,000) 1,466,000
CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD 2,232,000 1,280,000
------------ ------------
CASH AND RESTRICTED CASH AT END OF PERIOD $ 2,153,000 $ 2,746,000
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 4,157,000 $ 4,120,000
============ ============
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 5
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
<TABLE>
<CAPTION>
Six Months Ended March 31,
1997 1996
-----------------------------
(Unaudited)
<S> <C> <C>
During the period, the Company sold Series A and B Bonds for
the following non-cash consideration:
Assignment of note payable $14,000,000
Investment in affiliate 3,165,000
-----------
$17,165,000
===========
Property acquired in exchange for partnership units $ 549,000
===========
Net cost of assets transferred to lien holder:
Land $ 2,047,000
Buildings and improvements 21,601,000
Tenant improvements 477,000
Accumulated depreciation (3,557,000)
-----------
Total rental property 20,568,000
Unbilled rent receivable, net 1,109,000
Tenant and other accounts receivable 340,000
Leasing commissions, net 181,000
Prepaid expense and other assets 87,000
Accounts payable and other liabilities 589,000
-----------
Net cost of assets transferred to lien holder 22,874,000
Nonrecourse debt extinguished 28,500,000
-----------
Excess of nonrecourse debt over net cost of assets surrendered $ 5,626,000
===========
Noncash gain from transfer of property to lien holder:
Extraordinary gain on retirement of debt $ 9,311,000
Minority interest share of extraordinary gain 1,055,000
-----------
Extraordinary gain on retirement of debt 10,366,000
Extraordinary loss related to other refinancing transactions 134,000
-----------
Extraordinary gain on transfer of property to lien holder 10,500,000
Loss on disposition of rental property (4,874,000)
-----------
Noncash gain from transfer of property to lien holder $ 5,626,000
===========
Distributions declared not yet paid $ 1,621,000 $ 1,642,000
=========== ===========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 6
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
G&L Realty Corp. (the "Company") was formed as a Maryland corporation on
September 15, 1993 to continue the ownership, management, acquisition and
development operations of medical office buildings conducted previously by G&L
Development, a California partnership, the Company's predecessor. All of the
Company's assets are held by, and all of its operations are conducted through,
the following entities:
G&L Realty Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership")
G&L Realty Financing Partnership II, L.P., a Delaware limited
partnership (the "Realty Financing Partnership")*
G&L Medical Partnership, L.P., a Delaware limited partnership
(the "Medical Partnership")*
435 North Roxbury Drive, Ltd., a California limited partnership
(the "Roxbury Partnership")
*The Realty Financing Partnership and the Medical Partnership are
herein defined collectively as the "Financing Entities" and individually as a
"Financing Entity".
The Company, as the sole general partner and as owner of an approximately
89% ownership interest, controls the Operating Partnership. The Company controls
the Financing Entities through wholly owned subsidiaries incorporated in the
State of Delaware ( collectively, the "Subsidiaries" and individually, a
"Subsidiary"). Each Subsidiary owns, as sole general partner, a 1% ownership
interest in its related Financing Entity. The remaining 99% ownership interest
in each Financing Entity is owned by the Operating Partnership, acting as sole
limited partner.
References in these consolidated financial statements to the Company, its
operations, assets and liabilities include the operations, assets and
liabilities of the Operating Partnership, the Subsidiaries, the Financing
Entities and the Roxbury Partnership (in which the Operating Partnership owns a
61.75% partnership interest and is the sole general partner).
The Company also owns interests in two unconsolidated affiliates: (i) GLN
Capital Co., LLC ("GLN Capital"), a Delaware limited liability company formed in
1996, and (ii) GL/PHP, LLC ("GL/PHP"), a Delaware limited liability company
formed in 1997. The Operating Partnership and an affiliate of Nomura Asset
Capital Corp. ("Nomura") own 49.9% and 50.1% interests, respectively, of GLN
Capital. GLN Capital was formed in order to fund loans to the senior care
industry.
The Operating Partnership and PHP Healthcare Corporation, a Delaware
corporation ("PHP") own 80.5% and 19.5% interests, respectively, in GL/PHP,
which purchased six New Jersey medical office properties in February 1997 for
$22.4 million. These properties total 80,415 square feet and have been leased to
PHP.
Page 7
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - The Company is a self-administered and self-managed real estate
investment trust ("REIT") that finances, acquires, develops, manages and leases
health care properties. The Company's business currently consists primarily of
investments, either directly or through joint ventures, in health care
properties (primarily through its Medical Office Building Division) and in debt
obligations secured by health care properties (primarily through its Senior Care
Division).
Basis of Presentation - The accompanying condensed consolidated financial
statements include the accounts of the Company. The interests in 435 North
Roxbury Drive, Ltd. not owned by the Company have been reflected in minority
interests. All significant intercompany accounts and transactions have been
eliminated in consolidation.
The information for the six month periods ended June 30, 1997 and 1996 has
not been audited by independent accountants, but includes all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for such periods.
The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of results that might be expected for the full fiscal
year.
Certain information and footnote disclosures normally included in annual
financial statements have been omitted. The Company believes that the
disclosures included in these financial statements are adequate for a fair
presentation and conform to reporting requirements established by the Securities
and Exchange Commission ("SEC"). The condensed consolidated financial statements
as presented herein should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K as filed with the SEC.
The Condensed Consolidated Balance Sheets reflect the combined assets and
liabilities of the Company. The Condensed Consolidated Statements of Operations
and Cash Flows have been prepared to reflect the operations of the Company for
the periods ended June 30, 1997 and 1996.
Cash and Restricted Cash - As of June 30, 1997, the Company had $2,153,000
in a segregated interest bearing account to be used for debt service due in July
1997, current property taxes, insurance and property improvements. Accounts
payable and other liabilities included a bank overdraft of $385,000 at June 30,
1997, which was subsequently funded by a draw against the Company's credit line.
Assets Available for Sale - The Company is currently involved in
negotiations to sell certain assets. The associated cost of these assets is
included in the Company's balance sheet as assets available for sale. No
adjustment has been made to the cost basis of these assets as Management
believes that the net realizable value of the assets available for sale
approximate their original cost.
Per Share Data - Earnings per share are computed based upon the weighted
average number of common shares outstanding during the period. The treasury
stock method is used to determine the number of incremental common equivalent
shares resulting from options granted under the Company's 1993 Stock Incentive
Plan. As of June 30, 1997, there were approximately 371,500 stock options
outstanding with a weighted average exercise price of $12.125. Using the closing
market price of $16.375 on June 30, 1997, the number of shares which may be
issued pursuant to the Plan is 96,420.
Page 8
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
3. BUILDINGS AND IMPROVEMENTS
Buildings and improvements consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------------------------
(Unaudited)
<S> <C> <C>
Buildings and improvements $ 81,946,000 $ 81,677,000
Tenant improvements 5,045,000 4,708,000
Furniture, fixtures and equipment 366,000 359,000
------------ ------------
87,357,000 86,744,000
Less accumulated depreciation and amortization (12,046,000) (10,609,000)
------------ ------------
Total $ 75,311,000 $ 76,135,000
============ ============
</TABLE>
4. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-----------------------------
(Unaudited)
<S> <C> <C>
Deferred financing costs $1,655,000 $2,061,000
Pre-acquisition costs --- 17,000
Leasing commissions 504,000 462,000
Prepaid expense and other assets 644,000 272,000
---------- ----------
2,803,000 2,812,000
Less accumulated amortization (389,000) (367,000)
---------- ----------
Total $2,414,000 $2,445,000
========== ==========
</TABLE>
Page 9
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
5. STOCKHOLDERS' EQUITY
As described in Note 2, the Company has elected to be treated, for
federal income tax purposes, as a REIT. As such, the Company is required to
distribute annually, in the form of distributions to its stockholders, at least
95% of its taxable income. In reporting periods in which distributions exceed
net income, stockholders' equity will be reduced by the distributions in excess
of net income in such period and will be increased by the excess of net income
over distributions in reporting periods in which net income exceeds
distributions. For tax reporting purposes, a portion of the dividends declared
represents a return of capital. The following table reconciles net income and
distributions in excess of net income for the six month period ended June 30,
1997 and for the year ended December 31, 1996:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-----------------------------
(Unaudited)
<S> <C> <C>
Distributions in excess of net income at beginning of period $(1,303,000) $(5,479,000)
Net income during period 2,388,000 9,701,000
Less: Distributions declared (3,095,000) (5,525,000)
----------- -----------
Distributions in excess of net income $(2,010,000) $(1,303,000)
=========== ===========
</TABLE>
6. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
GLN CAPITAL
- -----------
On November 25, 1996, the Company expanded its activities in the Senior
Care Division by entering into an unconsolidated operating venture, GLN Capital,
which commenced operations in January 1997. Subsequent to the formation of GLN
Capital, GMAC Commercial Mortgage ("GMAC-CM"), which has previously funded four
loans to the Company, committed to provide to GLN Capital a $50.0 million credit
line that will be secured by loans originated by GLN Capital.
In March 1997, the Company sold Series A and B Industrial Revenue Bonds
(the "Bonds") issued by the Massachusetts Industrial Finance Agency to GLN
Capital for total consideration of $21.7 million. The Bonds, which had a book
value of $20.6 million at the time of sale, were purchased in October 1995 for
$19.9 million. At the time of sale, the Series A and B Bonds had a combined
outstanding balance of $27.7 million, including principal (at face value) and
accrued interest. Total consideration included $4.5 million in cash, a $3.2
million capital contribution to GLN Capital, and an assumption of the $14
million note due and payable to GMAC-CM (the "GMAC Loan").
On June 1, 1997 the Operating Partnership provided a loan in the amount of
$14 million (the "Loan") to GLN Capital, the proceeds of which were used to
retire the GMAC Loan. Pursuant to the terms of the Security Agreement, the Loan
will mature on June 1, 1998 and will bear interest at the prime lending rate
plus 1.5% adjusted monthly. Subject to the Security Agreement, GLN Capital
assigned a security interest in the Bonds to the Operating Partnership as
collateral for the Loan.
Page 10
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
GL/PHP
- ------
On February 26, 1997 the Operating Partnership entered into a joint venture
with PHP to form GL/PHP. The Operating Partnership and PHP contributed a total
of $4.4 million in proportion to their 80.5% and 19.5% respective interests in
GL/PHP. In conjunction with its formation, GL/PHP purchased six medical office
properties in New Jersey, totaling 80,415 square feet, for a purchase price of
$22.3 million. The balance of the purchase price was financed by two loans from
PHP, secured by first and second mortgages. Subject to restrictions in the
operating agreement, the Operating Partnership is the sole manager of GL/PHP,
and until August 31, 1997, PHP has an option to purchase the Operating
Partnership's interest in GL/PHP. Mr. Charles P. Reilly, a director of the
Company and chairman of the Compensation Committee of the Company's Board of
Directors, is Chairman of the Board of Directors of PHP.
The following properties, which were acquired from Blue Cross/Blue Shield
of New Jersey, are 100% leased to PHP pursuant to the terms of a net lease that
provides for rent escalations every 18 months equal to increases in the Consumer
Price Index, subject to a 5% minimum and an 8% maximum.
<TABLE>
<CAPTION>
YEAR RENTABLE TOTAL AVERAGE
CONSTRUCTED SQUARE ANNUALIZED RENT PER
PROPERTY OR REHABILITATED FEET (1) RENT (2) SQ. FT. (3)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2103 Mt. Holly Rd.
Burlington, NJ 1994 12,560 $ 414,000 $32.96
150 Century Parkway
Mt. Laurel, NJ 1995 12,560 371,450 29.57
274 Highway 35, South
Eatontown, NJ 1995 12,560 457,930 36.46
80 Eisenhower Drive
Paramus, NJ 1994 12,675 401,465 31.67
16 Commerce Drive
Cranford, NJ 1963 17,500 468,740 26.79
4622 Black Horse Pike
Mays Landing, NJ 1994 12,560 416,415 33.15
------ ----------
Total 80,415 $2,530,000 $31.46
====== ========== ======
</TABLE>
(1) Rentable square feet includes space used for management purposes but does
not include storage space.
(2) Rent is based on third-party leased space billed in February 1997; no rent
is assumed from management space.
(3) Average rent per square foot is calculated based upon third-party leased
space, excluding management space.
Page 11
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
The following table provides a summary of the Company's investment in its
unconsolidated affiliates, GL/PHP and GLN Capital, as of June 30, 1997.
<TABLE>
<CAPTION>
GL/PHP GLN Capital Total
--------------------------------------
<S> <C> <C> <C>
Cash contributions $3,542,000 $2,038,000 $5,580,000
Non-Cash contributions --- 3,165,000 3,165,000
Equity in earnings 169,000 572,000 741,000
Unrecognized gain --- (537,000) (537,000)
Cash distributions --- (167,000) (167,000)
---------- ---------- ----------
BALANCE June 30, 1997 $3,711,000 $5,071,000 $8,782,000
========== ========== ==========
</TABLE>
Following is a summary of the condensed financial information, as of June
30, 1997, for the unconsolidated affiliates, GL/PHP and GLN Capital.
<TABLE>
<CAPTION>
GL/PHP GLN Capital
----------------------------
<S> <C> <C>
Financial Position:
------------------
Rental properties, net $ 22,261,000 ---
Notes and bonds receivable, net --- $ 30,605,000
Other Assets 477,000 277,000
Notes payable (18,000,000) (21,134,000)
Other liabilities (128,000) (186,000)
------------ ------------
Net Assets: $ 4,610,000 $ 9,562,000
============ ============
Partner's equity:
----------------
G&L Realty Partnership, L.P. $ 3,542,000 $ 5,203,000
Others 858,000 3,522,000
Current earnings 210,000 1,108,000
Cash distributions --- (271,000)
------------ ------------
$ 4,610,000 $ 9,562,000
============ ============
Operations:
----------
Revenues $ 850,000 $ 1,847,000
Expenses 640,000 739,000
------------ ------------
Net Income $ 210,000 $ 1,108,000
============ ============
Allocation of net income:
------------------------
G & L Realty Partnership, L.P. $ 169,000 $ 572,000
Others 41,000 536,000
------------ ------------
$ 210,000 $ 1,108,000
============ ============
</TABLE>
Page 12
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
7. STOCKHOLDER EQUITY AND DEBT OUTSTANDING
The Company issued 1,495,000 shares (including an over allotment of 195,000
shares) of 10.25% Series A Cumulative Preferred Stock, par value $.01 (the
"Series A Preferred Stock") in May 1997. Dividends on the Series A Preferred
Stock are cumulative from the date of issue and are payable monthly to
shareholders of record on the first day of each month. The dividends, which
commenced on June 15, 1997, are payable at the rate of $2.5625 per share,
yielding 10.25% per annum based upon the $25 per share liquidation preference.
The Company may redeem the Series A Preferred Stock at the redemption price of
$25 per share plus any accumulated, unpaid dividends at any time after June 1,
2001.
Upon consummation of the offering, the Company received net proceeds of
$35.4 million. The Company contributed the net proceeds of the Series A
Preferred Stock offering to the Operating Partnership in exchange for a new
series of preferred partnership units having terms substantially similar to
those of the Series A Preferred Stock. Approximately $28.7 million of the
proceeds were used by the Operating Partnership to repay, without prepayment
charges or penalties, the following notes payable. The excess proceeds
(approximately $6.7 million) were invested in interest-bearing accounts.
<TABLE>
<S> <C>
Credit line due August 17, 1998, collateralized by deeds of trust,
$20 million available, interest payable monthly at 30 day LIBOR plus
plus 1.75% per annum (7.5% at pay-off)................................... $16,900,000
Unsecured credit line due December 11, 1997. $3.0 million available,
interest payable monthly at the prime rate plus 2.0% (10.5% at pay-off) 1,000,000
Note due June 17, 1997, collateralized by note receivable and deed of trust,
interest payable monthly at the Citibank Prime rate of interest (8.5% at
pay-off)................................................................. 4,125,000
Note due May 31, 1997, collateralized by note receivable and deed of trust,
interest payable monthly at the Citibank Prime rate of interest (8.5% at
pay-off)................................................................ 3,000,000
Note due August 28, 1997, collateralized by equity investment in affiliate,
interest payable at 12% per annum....................................... 3,700,000
</TABLE>
At various times during the second quarter, the Company repurchased a total
of 56,800 shares of the Company's Common Stock at an average price of
approximately $16.30 per share.
8. COMMITMENTS AND CONTINGENCIES
Neither the Company, the Operating Partnership, the Financing Entities, the
Roxbury Partnership nor any of the assets within their portfolios of medical
office buildings, parking facilities, and retail space (the "Properties") is
currently a party to any material litigation.
Page 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Unaudited Condensed Consolidated Financial Statements and Notes thereto included
elsewhere in this Form 10-Q.
Except for the historical information contained herein, the matters
discussed in this Form 10-Q are forward-looking statements which involve risk
and uncertainties. The risk and uncertainties include, but are not limited to,
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices, and other factors
discussed in the Company's filings with the SEC.
Results of Operations
- ---------------------
Comparison of the Three Month Period Ended June 30, 1997 versus the Three Month
Period Ended June 30, 1996
A comparison of net income, revenues, and expenses for the quarters ended
June 30, 1997 and June 30, 1996 will be impacted primarily by the financial
effects of the May 1996 transfer of the property located at 436 North Bedford
Drive to the lender for such property. While net income declined $4,676,000 from
$5,958,000 for the quarter ended June 30, 1996 to $1,282,000 for the same period
in 1997, the primary components affecting this decline were the $4,874,000 loss
on disposition of rental property and the associated $9,311,000 extraordinary
gain on retirement of the debt in 1996. Net of minority interests, these two
items contributed $4,943,000 to the Company's second quarter 1996 earnings.
In August 1996, the Company reacquired the 436 North Bedford Drive
property. Therefore, the second quarter of 1997 includes a full quarter of
operations for this property compared to a partial quarter of operations in
1996. The increases in revenues related to rents, tenant reimbursements and
parking during the second quarter of 1997 as compared to 1996 are primarily
attributed to the May 1996 transfer of the 436 North Bedford Drive to the lender
for such property and the related absence of rents, tenant reimbursements and
parking revenues during the remainder of May and the full month of June 1996.
Likewise, the second quarter 1997 increase in property operations and
depreciation and amortization expense can be attributed to the 436 North Bedford
Drive transaction.
The Company's investments in GLN Capital and GL/PHP contributed $609,000 to
second quarter 1997 earnings before any adjustment for minority interests. Prior
to 1997, the Company invested directly in trust deeds secured by senior care
facilities. The formation of GLN Capital expanded the Company's access to
capital; however, new investments are made through GLN Capital. The expansion of
GLN Capital's activities contributed to the decline in revenues from interest,
loan fees and related income from $1,626,000 during the second quarter of 1996
to $808,000 for the same period in 1997. The trend toward investment in GLN
Capital and away from direct investments in trust deeds is anticipated to
continue. Based upon the Company's 80.5% interest in GL/PHP, the Company's
second quarter earnings were approximately $125,000 higher in 1997 when compared
to 1996. Including a quarterly depreciation adjustment of $84,000, the $3.5
million invested in GL/PHP is expected to continue contributing approximately
$209,000 to quarterly funds from operations ("FFO").
Page 14
<PAGE>
In May 1997, the Company issued 1,495,000 shares of Series A Preferred
Stock and used $28.7 of the $35.4 million proceeds to reduce the Company's
indebtedness. The reduction in debt contributed to the $247,000 decline in
interest expense from 1996 to 1997.
Comparison of the Six Month Period Ended June 30, 1997 versus the Six Month
Period Ended June 30, 1996
As discussed in the three month comparison above, net income, revenues, and
expenses for the six months ended June 30, 1997 and June 30, 1996 are impacted
primarily by the financial effects of the May 1996 transfer of the property
located at 436 North Bedford Drive to the lender for such property. Net income
declined $4,922,000 from $7,310,000 for the six months ended June 30, 1996 to
$2,388,000 for the same period in 1997. As indicated above, the primary
components affecting this decline were the $4,874,000 loss on disposition of
rental property and the associated $9,311,000 extraordinary gain on retirement
of the debt in 1996. Net of minority interests, the combination of these items
contributed $4,943,000 to the Company's net income for the first six months of
1996.
The 1996 disposition and reacquisition of the 436 North Bedford Drive
property also contributed to increases in rents, tenant reimbursements and
parking revenues during the first six months of 1997 when compared to 1996 due
to the related absence of rents, tenant reimbursements and parking revenues that
resulted from the May 1996 property disposition. The first six months of 1997
reflected a similar increase in property operations and depreciation and
amortization expenses as compared to 1996.
During the first quarter of 1997, the Company ceased making direct
investments in secured trust deeds and began making short-term secured loans
through GLN Capital, an unconsolidated affiliate. The subsequent $818,000
decline in interest, loan fees and related income, from the six months ended
June 30, 1996 compared to the same period in 1997, reflects the Company's
decision to cease making direct investments in secured trust deeds.
Approximately 77% of the $741,000 increase in earnings of unconsolidated
affiliates for the six months ended June 30, 1997 compared to the same period in
1996, can be attributed to the Company's new investments in short-term secured
loans through GLN Capital. The Company accounts for its investment in GLN
Capital using the equity method. As a result, the Company's allocated share of
revenues are reported net of expenses and after income from operations.
Liquidity and Capital Resources
- -------------------------------
The Company obtains its liquidity from multiple internal and external
sources. Internally, funds are derived from the operation of medical office
buildings and senior care lending activities and primarily consist of FFO less
dividends (see discussion below of FFO). Except for the recently completed
preferred stock offering, the Company's external sources of capital consist of
various secured loans and lines of credit. The Company's ability to expand its
medical office and senior care lending operations requires continued access to
capital to fund new acquisitions and loans either directly or through various
affiliates. During the six months ended June 30, 1997, the Company paid
dividends on its Common Stock equal to approximately 81% of its FFO.
Undistributed FFO was used internally to fund maintenance and capital
expenditures necessary to maintain the Company's existing properties.
The Company declared a quarterly distribution on its Common Stock for the
second quarter of 1997, in the amount of $0.36 per share, which was paid on July
15, 1997 to stockholders of record on June 30, 1997. In June, the Company also
declared and paid a monthly distribution of approximately $0.128 per share to
holders of the Company's newly issued Series A Preferred Stock. During the six
Page 15
<PAGE>
month period ended June 30, 1997 the Company invested approximately $648,000 to
maintain its rental properties and lease its vacant space.
During the past fourteen months, the Company has refinanced approximately
$19.8 million of its long term debt, issued preferred stock to repay an
additional $28.7 million of debt, negotiated loan extensions on $9.0 million of
debt and retired $28.5 million of debt associated with the rental property
located at 436 North Bedford. As of June 30, 1996, the Company had approximately
one third of its total debt ($35.0 million) due within a one-year period. As of
June 30, 1997 and except for recurring debt amortization of approximately
$80,000 per month, the Company has no long term debts due until August 1998,
when the Company's $20.0 million credit line will expire ($5.7 million currently
outstanding) and May 1999, when $7.0 million will be due to the lender on the
loan that is secured by the 435 North Roxbury Drive property. Other than
recurring amortization, the remaining $64.1 million of fixed rate debt will not
be due until 2005. As of June 30, 1997 $13.5 million, or 17.4%, of the Company's
indebtedness is variable rate debt, and $64.1 million, or 82.6%, is fixed rate
debt.
As a result of the aforementioned Series A Preferred Stock offering, the
Company received approximately $35.4 million in May 1997. These funds were used
to retire various debt obligations as described in Note 7 to the Unaudited
Condensed Consolidated Financial Statements included elsewhere in this Form
10-Q.
In general, the Company expects to continue meeting its short term
liquidity requirements through its working capital and the cash flow provided by
operations. The Company considers its ability to generate cash to be good and
expects to be able to meet all operating requirements and to provide sufficient
funds to maintain stockholder distributions in accordance with REIT
requirements. Long-term liquidity requirements such as refinancing mortgages,
financing acquisitions and financing capital improvements may be accomplished
through long-term borrowings, the issuance of debt securities and the offering
of additional equity securities.
Page 16
<PAGE>
G&L REALTY CORP.
FUNDS FROM OPERATIONS AND ADDITIONAL DATA
(Unaudited)
Funds from Operations
- ---------------------
Industry analysts generally consider FFO to be an appropriate measure of
the performance of a REIT. The Company presents FFO based upon the new
guidelines established by the Board of Governors of the National Association of
Real Estate Investment Trusts ("NAREIT"). FFO is calculated to include the
minority interest's share of income since the Operating Partnership's net income
is allocated proportionately among all owners of Operating Partnership units.
The number of Operating Partnership units held by the Company is identical to
the number of outstanding shares of the Company's common stock, and owners of
Operating Partnership units may, at their discretion and subject to certain
restrictions, exchange their units into shares of common stock on a one-for-one
basis.
The Company believes that in order to facilitate a clear understanding of
the operating results of the Company, FFO should be examined in conjunction with
the Company's net income as presented in the Condensed Consolidated Financial
Statements and Notes thereto included elsewhere in this Form 10-Q, the
additional data presented below, and the Company's Consolidated Financial
Statements and related Notes included in the Company's annual report on Form 10-
K. FFO is only one of a range of indicators which should be considered in
determining a company's operating performance. The methods of calculating FFO
among different companies are subject to variation, and FFO therefore may be an
invalid measure of comparing companies. Also, the elimination of depreciation
and gains and losses on sales of property may not be a true indication of an
entity's ability to recover its investment in properties. The tables below
present an analysis of FFO and certain additional data for the three-month and
six-month periods ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
----------------------------------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
FUNDS FROM OPERATIONS (1):
Net income $1,282 $ 5,958 $2,388 $ 7,310
ADD: Minority interest in Operating Partnership 136 (380) 272 (227)
ADD: Real estate related depreciation and
amortization 713 672 1,449 1,379
ADD: Loss on disposition of rental property --- 4,874 --- 4,874
ADD: Depreciation from unconsolidated
affiliates 84 --- 112 ---
LESS: Extraordinary gain --- (9,311) --- (9,311)
LESS: Adjustment for minority interest in
consolidated partnership (8) (7) (16) (14)
LESS: Dividends on preferred stock (192) --- (192) ---
------- ------- ------- -------
Funds from Operations (1) $2,015 $1,806 $4,013 $4,012
======= ======= ======= =======
Weighted averages shares outstanding (2) 4,504 4,523 4,533 4,522
======= ======= ====== ======
</TABLE>
Table and footnotes continue on the following page.
Page 17
<PAGE>
G&L REALTY CORP.
FUNDS FROM OPERATIONS AND ADDITIONAL DATA -- (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
------------------------------------------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
ADDITIONAL DATA
- ---------------
Cash Flows:
- ----------
Operating Activities 2,165 2,862 2,455 3,716
Investing Activities (9,618) (15,215) (15,906) (15,364)
Financing Activities 6,994 13,341 13,372 13,114
Capital Expenditures
- --------------------
Building improvements 167 128 269 198
Tenant improvements 217 391 337 719
Furniture, fixtures & equipment --- 25 7 27
Leasing commissions 28 34 42 67
Depreciation and Amortization
- -----------------------------
Depreciation of real estate assets 693 642 1,409 1,309
Depreciation of non-real estate assets 14 11 28 22
Amortization of deferred lease costs 20 30 40 70
Amortization of capitalized financing costs 235 157 401 256
Accrued rent in excess of billed rent 62 (114) 139 (148)
</TABLE>
_____________
(1) FFO represents net income (computed in accordance with generally accepted
accounting principles, consistently applied ("GAAP")), excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation of
real property, less preferred stock dividends and after adjustments for
consolidated and unconsolidated entities in which the Company holds a
partial interest. FFO is computed in accordance with the definition adopted
by NAREIT. FFO should not be considered as an alternative to net income or
any other indicator developed in compliance with GAAP, including measures of
liquidity such as cash flows from operating, investing and financing
activities. FFO is helpful in evaluating the performance of a real estate
portfolio considering the fact that historical cost accounting assumes that
the value of real estate diminishes predictably over time. FFO is only one
of a range of indicators which should be considered in determining a
company's operating performance. The methods of calculating FFO among
different companies are subject to variation; therefore, FFO may be an
invalid measure for purposes of comparing companies. Also, the elimination
of depreciation and gains and losses on sales of property may not be a true
indication of an entity's ability to recover its investment in properties.
The Company implemented the new method of calculating FFO effective as of
the NAREIT-suggested adoption date of January 1, 1996.
(2) Assumes that all outstanding Operating Partnership units have been
converted to common stock.
Page 18
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Neither the Company, the Operating Partnership, the Financing
Entities, the Roxbury Partnership nor any of the assets within their
portfolio of Properties is currently a party to any material
litigation.
Item 2 Changes in Securities.
In May 1997, the Company issued 1,495,000 shares (including an over
allotment of 195,000 shares) of 10.25% Series A Cumulative Preferred
Stock, par value $.01 (the "Series A Preferred Stock"). The issuance of
the Series A Preferred Stock has the effect of modifying the rights of
the holders of the Company's Common Stock insofar as the holders of the
Series A Preferred Stock enjoy preferential rights as to dividends and
proceeds upon liquidation. See Note 7 to the Condensed Consolidated
Financial Statements included elsewhere in this Form 10-Q.
Item 3 Defaults Upon Senior Securities.
None.
Item 4 Submission of Matters to a Vote of Security Holders.
On May 28, 1997, the Company held its 1997 Annual Meeting of
Stockholders. Three items of business were conducted at the meeting (i)
the election of directors, (ii) a proposal to approve certain future
partnership interest issuances, and (iii) a proposal to amend and
restate the Company's 1993 Stock Incentive Plan.
(i) The seven directors elected at the Annual Meeting, to serve
for the term ending at the next Annual Meeting of Stockholders or until
their successors are duly elected and qualified or until they resign or
are removed, were the following:
<TABLE>
<CAPTION>
NAME VOTES FOR VOTES WITHHELD
<S> <C> <C>
Daniel M. Gottlieb 3,218,194 29,680
Steven D. Lebowitz 3,218,077 29,797
Richard L. Lesher 3,218,694 29,180
Leslie D. Michelson 3,218,577 29,297
Reese L. Milner 3,218,994 28,880
Charles P. Reilly 3,218,994 28,880
S. Craig Tompkins 3,218,994 28,880
</TABLE>
Page 19
<PAGE>
(ii) The proposal to approve the issuance to one or more directors
of the Company, or entities in which they have a substantial interest,
of partnership interests in G&L Realty Partnership, L.P. that are
convertible into up to 5% of the outstanding shares of Common Stock of
the Company as consideration for acquisitions of property by the
Company from such persons or entities in transactions approved as fair
to the Company by a committee of independent directors and in which
each such partnership interest is valued at a premium of $0.25 over
the market value of a share of Common Stock was approved with the
following votes:
<TABLE>
<S> <C>
Number of Votes FOR: 1,647,834
Number of Votes AGAINST: 147,354
Number of Votes ABSTAINING: 57,846
Number of Broker Non-Votes: 1,394,840
</TABLE>
(iii) The proposal to amend and restate the Company's 1993 Stock
Incentive Plan was approved with the following votes:
<TABLE>
<S> <C>
Number of Votes FOR: 2,894,733
Number of Votes AGAINST: 213,990
Number of Votes ABSTAINING: 51,607
Number of Broker Non-Votes: 87,544
</TABLE>
Item 5 Other Information.
None.
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
10.44 Loan and Security Agreement by GLN Capital Co., LLC., a
Delaware limited liability company, and G&L Realty
Partnership, L.P., a Delaware limited partnership, dated as
of June 1, 1997.
27 Financial Data Schedule
(b) Reports on Form 8-K.
(i) The Company filed a Report on Form 8-K on March 31, 1997 and
an Amended Report on Form 8-K/A on May 30, 1997 concerning
the sale of certain Series A and B Industrial Revenue Bonds
issued by the Massachusetts Industrial Finance Agency (the
"Bonds"). The Bonds had an aggregate principal amount of
$25,665,000 and carried accrued and unpaid interest of
approximately $2,000,000 at the time of sale. The Operating
Partnership sold the Bonds to GLN Capital for $7,665,000 and,
in connection therewith, assigned to GLN Capital $14,000,000
in indebtedness owed to GMAC-CM.
Page 20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
G&L REALTY CORP.
Dated: August 13, 1997 By: /s/ Quentin Thompson
--------------------
Quentin Thompson
Secretary, Treasurer
and Chief Accounting Officer
Page 21
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ -----------------------------------------------------------------
<S> <C>
10.44 Loan and Security Agreement by GLN Capital Co., LLC., a Delaware
limited liability company, and G&L Realty Partnership, L.P., a
Delaware limited partnership, dated as of June 1, 1997.
27 Financial Data Schedule
</TABLE>
Page 22
<PAGE>
EXHIBIT 10.44
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is entered into as
of June 1, 1997, by GLN CAPITAL CO., LLC., a Delaware limited liability company
(the "Borrower") and G & L REALTY PARTNERSHIP, L.P., a Delaware limited
partnership (the "Lender").
WITNESSETH:
----------
WHEREAS, subject to and upon the terms, conditions and provisions of
this Agreement, the Lender shall provide a loan in the amount of Fourteen
Million Dollars ($14,000,000.00) (the "LOAN") to the Borrower upon and subject
to the provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement and intending to be legally bound, the
Borrower and Lender agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1 DEFINITIONS.
-----------
In this Agreement (except as otherwise expressly provided for or
unless the context otherwise requires), the following terms shall have the
meanings specified in this Article:
"ACCOUNTANT" means a nationally recognized accounting firm or other
firm acceptable to the Lender.
"AFFILIATE" means, with respect to any designated Person, each Person
who directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, another designated PERSON.
"AGREEMENT" means this Loan and Security Agreement as amended,
modified or supplemented from time to time.
"ASSIGNMENT OF BONDS" means the Assignment of Bonds dated as of June
1, 1997 from the Borrower to the Lender.
"AUTHORIZED PERSON" means one or more individuals duly authorized to
bind the Borrower in connection with this Agreement. By a written notice to the
Lender, duly authorized by the Borrower, the Borrower may add or substitute
additional individuals to act as Authorized Persons.
<PAGE>
"BONDS" means Massachusetts Industrial Finance Authority Health Care
Revenue Bonds (Hampden Nursing Homes, Inc. Project) Series 1989A and
Massachusetts Industrial Finance Agency Revenue Bonds (Hampden Nursing Homes,
Inc. Project) Series 1989B.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in Los Angeles, California are required or
authorized by applicable Legal Requirements (including executive order) to
close, or (iii) a day on which the New York Stock Exchange is closed.
"CLOSING" means 10:00 a.m. on June 1, 1997, or on such other date as the
parties shall mutually agree, at the offices of Lender, 439 North Bedford Drive,
Beverly Hills, California 90210.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder, including any amendments and successor provisions
thereto.
"COLLATERAL" means the Bonds and any and all other property now or
hereafter acquired by the Borrower or in which the Borrower now has or at any
time in the future may acquire any right, title and interest and in which the
Borrower has granted a security interest to the Lender as security for the
Borrower's obligations hereunder or under any other Credit Document.
"CONTROL" (including, with the correlative meanings, the terms
"controlling", "controlled by" and "under common control with") means, as used
with respect to any Person, the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such other
Person, or of the Person, whether through contract, stock ownership, partnership
interests, membership, voting rights, governing boards, committees, divisions
or other bodies with one or more common members, directors, trustees or other
managers, or otherwise.
"CREDIT DOCUMENTS" means, collectively, this Agreement, the Note, the
Assignment of Bonds and any other agreements or instruments relating to the
Loan, as each may be amended, modified or supplemented from time to time.
"DEFAULT" means an event or condition which constitutes, or which after
giving of notice or lapse of time or both would constitute, an Event of Default.
"DEFAULT RATE" shall have the meaning ascribed to such term in Section 2.5.
-----------
"EVENT OF DEFAULT" shall have the meaning ascribed to such term in
Section 6.1.
- -----------
"FIRM COMMITMENT" means a commitment from HUD for the provision of mortgage
insurance for the Projects.
"FISCAL YEAR" means the annual accounting year of the Borrower, which
currently begins on January 1 in each calendar year.
2
<PAGE>
"GAAP" means at any time with respect to the determination of the character
or amount of any asset or liability or item of income or expense, or any
consolidation or other accounting computation, generally accepted accounting
principles as in effect on the date of, or at the end of the period covered by,
the financial statements from which such asset, liability, item of income, or
item of expense, is derived, or, in the case of any such computation, as in
effect on the date when such computation is required to be determined.
"Members" means G & L Realty Partnership, L.P., a Delaware limited
partnership, and Property Acquisition Trust I, a Delaware business trust.
"Governmental Action" or "Governmental Actions" means all permits,
authorizations, registrations, consents, certifications, approvals, waivers,
exceptions, variances, claims, orders, judgments and decrees, licenses,
exemptions, publications, filings, notices to and declarations of or with any
Governmental Authority.
"Governmental Authority" means any federal, state, or local governmental or
quasi-governmental subdivision, authority, or other instrumentality thereof and
any entity asserting or exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
"HUD" means, collectively, the Federal Housing Administration and the
United States Department of Housing and Urban Development.
"Indebtedness" means the indebtedness due in respect of the Loan.
"Interest Rate" means the Prime Rate plus 1.5%, adjusted monthly.
"Legal Requirements" means all statutes, codes, laws, ordinances,
regulations, rules, policies, or other federal, state, local and municipal
requirements of any Governmental Authority whether now or hereafter enacted or
adopted, and all judgments, decrees, injunctions, writs, orders or like action
of an arbitrator or a court or other Governmental Authority of competent
jurisdiction (including specifically those pertaining to health, safety, the
environment, tax-status of Real Estate Investment Trusts, Medicaid, Medicare and
nursing home certification and inspection).
"Loan Fee" means the fee due to General Motors Acceptance Corporation
("GMAC") from Borrower in connection with the pay-off of the loan ("GMAC Loan")
made by GMAC to Lender and assumed by Borrower, which was secured by the Bonds.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Borrower, (b) the ability of the Borrower to perform its obligations under this
Agreement, the Note or any of the Credit Documents or (c) the validity or
enforceability of this Agreement, the Notes or any of the Credit Documents or
the rights and remedies of the Lender hereunder or thereunder.
3
<PAGE>
"Maturity Date" means the final and absolute due date of the Note (whether
by acceleration, declaration, extension or otherwise), which shall be June 1,
1998, subject to the terms of Section 2.2.
-----------
"Note" means that certain promissory note of even date herewith issued by
the Borrower to the Lender in the principle amount of Fourteen Million Dollars
($14,000,000) to evidence the Loan, as the same may be amended, modified or
supplemented from time to time.
"Person" means any individual, for-profit or not-for-profit corporation,
partnership, joint venture, association, limited liability company, limited
liability partnership, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Prime Rate" means the rate of interest as published by The Wall Street
---------------
Journal in the Money Rates section from time to time.
- -------
"Project Owner" means Hampden Nursing Homes, Inc., a Massachusetts
not-for-profit corporation.
"Project" or "Projects" means the Chestnut Hill Nursing Home located in
East Longmeadow, Massachusetts, the Riverdale Gardens Nursing Home located in
West Springfield, Massachusetts and the Mary Lyon Nursing Home located in
Hampden, Massachusetts.
Section 1.2 Certain Terms Defined in Uniform Commercial Code. The
------------------------------------------------
following terms which are defined in the Uniform Commercial Code in effect in
the State of California on the date hereof (the "UCC") are used herein as so
defined: Accounts, Chattel Paper, General Intangibles, Instruments and Proceeds.
Section 1.3 Rules of Construction; Time of Day. In this Agreement, unless
----------------------------------
otherwise indicated, (i) defined terms may be used in the singular or the plural
and the use of any gender includes all genders, (ii) the words "hereof",
"herein", "hereto", "hereby" and "hereunder" refer to this entire Agreement,
(iii) all references to particular Articles or Sections are references to the
Articles or Sections of this Agreement, (iv) the terms "agree" and "agreements"
contained herein are intended to include and mean "covenant" and "covenants",
and (v) the term "including" shall mean "including, but not limited to".
References to any time of the day in this Agreement shall refer to Pacific
Standard Time or Pacific Daylight Saving Time, as in effect in Los Angeles,
California on such day.
ARTICLE 2.
THE LOAN
Section 2.1 Loan. Subject to the terms and conditions of this Agreement
----
and the Note, and relying upon the representations and warranties set forth
herein, the Lender agrees to make the Loan to the Borrower and the Borrower
agrees to accept the Loan from the Lender, and in consideration for the Loan,
the Borrower agrees to pay interest and certain fees to the Lender in accordance
with the terms of this Agreement and the Note.
4
<PAGE>
Section 2.2 MATURITY; PREPAYMENT.
--------------------
2.2.1 The Note shall mature and the entire unpaid principal
amount of the Loan shall be due and payable on the Maturity Date.
2.2.2 The Borrower shall be entitled to prepay the Loan in
whole or in part before the Maturity Date of the Note upon fifteen
(15) days prior notice to Lender.
Section 2.3 INTEREST.
--------
2.3.1 RATE AND CALCULATION OF INTEREST. Interest shall
--------------------------------
accrue on the outstanding unpaid principal balance of the Loan at the Interest
Rate from and after the date hereof through and until the Maturity Date of the
Note. Interest shall be calculated daily on the basis of a 365-day year factor
applied to actual days elapsed.
2.3.2 MONTHLY PAYMENTS. On the first day of each month,
----------------
commencing July 1 1997 and on the Maturity Date, the Borrower shall pay to the
Lender an amount equal to all interest accrued on the unpaid balance of the
Loan. All sums due by the Borrower hereunder or under the Note, whether
principal, interest, fees or other sums, shall be due and payable in full on the
Maturity Date of the Note.
Section 2.4 MANNER AND PLACE OF PAYMENT. The Borrower shall pay the
---------------------------
principal of, and interest on, the Note during regular business hours at the
Lender's office set forth in Section 7.1 or to such other address as the Lender
-----------
may from time to time designate in writing, in lawful money of the United States
and by wire transfer of immediately available funds (provided, however, that any
payment of principal of or interest on the Note received by the Lender at such
office or other place after 2:30 p.m., Los Angeles time, on any day shall be
deemed to have been received by the Lender on the next Business Day thereafter,
and shall bear interest accordingly. Any payment tendered other than by wire
transfer of federal or other immediately available funds shall be accepted by
the Lender subject to collection, and interest shall continue to accrue on the
unpaid balance of the principal sum as if such payment had not been made, until
the date immediately available funds are, on account of such payment, payable to
the Lender for its immediate use. All payments made under the Note shall be
applied first to late charges or other sums owing to the Lender, next to accrued
interest, and then to principal, or, in such other order or proportion as the
Lender, in its sole discretion may determine.
Section 2.5 LATE PAYMENT CHARGES; DEFAULT RATE. If the Borrower fails to
----------------------------------
make any payment of interest within five (5) days of the date such payment
becomes due and payable, the Borrower shall pay to the Lender a late charge
equal to ten percent (10%) of the amount of such payment. The late charge shall
be payable to the Lender as additional interest and not as a penalty. In
addition, if the Borrower fails to pay to the Lender any installment of
principal of or interest on, the Note or any other amount required to be paid
to the Lender hereunder or under the Note, this Agreement, or the other Credit
Documents when due, whether by acceleration or otherwise, the Borrower shall pay
to the Lender on demand interest on such principal, interest or other amount
from the date such payment incurred the above-referenced late charge until the
day of payment (after as well as before any judgment) at a rate equal to the
lesser of the Prime Rate plus five percent (5.0%) per annum, or the maximum rate
of interest permitted under
5
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applicable Legal Requirements of the State of California (the "DEFAULT RATE").
From and after the Maturity Date of the Note, the entire unpaid balance of the
Loan and all unpaid interest accrued on the Loan at such maturity shall bear
interest at the Default Rate. Interest at the Default Rate shall be payable
with the payment of the overdue amount, and otherwise shall be compounded
monthly on the first day of each and every calendar month until paid in full.
SECTION 2.6 SECURITY.
--------
2.6.1 PLEDGE AND ASSIGNMENT OF BONDS. The Borrower hereby
------------------------------
assigns and pledges to the Lender and grants the Lender a security interest in,
as additional collateral security for the Loan (and the Borrower acknowledges
and agrees that the Lender shall have a continuing security interest in) all of
the Borrower's right, title and interest in and to the Bonds, all of the
Borrower's rights associated with such Bonds, all General Intangibles arising
out of the Borrower's rights as holder of the Bonds, all present and future
rights of the Borrower to receive any payment of money or other distribution or
payment in its capacity as holder of the Bonds, any other property to which the
Borrower now or in the future may be entitled in its capacity as holder of the
Bonds, any other claim which the Borrower now has or may in the future acquire
in its capacity as holder of the Bonds, and all Proceeds of the foregoing. The
Borrower shall deliver the Bonds to the Lender or its designated agent
accompanied by the duly executed Assignment of Bonds.
2.6.2 FINANCING STATEMENTS. The Borrower will execute and
--------------------
deliver such financing statements and continuation statements, and perform such
other acts, under the Uniform Commercial Code of the applicable states or other
applicable Legal Requirements as the Lender may specify in order to perfect and
maintain perfection of the Lender's security interests under this Agreement and
the Credit Documents, and the Borrower will pay the costs of filing the same in
such public offices as the Lender may designate.
2.6.3 BORROWER REMAIN LIABLE. Anything herein to the contrary
----------------------
notwithstanding, the Borrower shall remain liable under the Collateral to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with and pursuant to the terms and
provisions thereof. The Lender shall not have any obligation or liability by
reason of or arising out of this Agreement or the receipt by the Lender of any
payment relating to any Collateral pursuant hereto, nor shall the Lender be
obligated in any manner to perform any of the obligations of the Borrower under
or pursuant to the Collateral, to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any thereof, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts that may have been pledged to it or to which it may be
entitled at any time or times.
2.6.4 PROCEEDS. Unless an Event of Default shall have
--------
occurred, the Lender hereby authorizes the Borrower to collect, receive and
retain, dividend or otherwise utilize all payments of principal or interest made
on the Bonds. Upon notice by the Lender at any time after the occurrence of an
Event of Default, the foregoing authorization shall automatically be terminated
and thereafter any such payments which may be paid to or collected by the
Borrower, shall be forthwith deposited by the Borrower in the exact form
received, duly
6
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endorsed (without recourse) by the Borrower to the Lender if required, in a
special bank account maintained by the Lender, subject to withdrawal by the
Lender as hereinafter provided, and until so turned over, shall be held by the
Borrower in trust for the Lender, segregated from other funds of the Borrower.
2.6.5 Lender's Appointment as Attorney-in-fact.
----------------------------------------
(a) Powers as Attorney-in-fact. Effective immediately,
--------------------------
without limiting any rights or powers granted herein to the Lender while no
Event of Default has occurred and is continuing, the Borrower hereby irrevocably
constitutes and appoints the Lender and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority, in the place and stead of the Borrower and in
the name of the Borrower or in its own name, for the purpose of carrying out the
terms of this Agreement, without notice to or assent by the Borrower, to do the
following:
(i) upon the occurrence and during the continuance
of any Event of Default, to exercise all rights, powers and principles to the
same extent as the Borrower under the Collateral;
(ii) to the extent that the Borrower would have the
right to do under the Collateral, upon the occurrence and during the continuance
of any Event of Default, in the name of the Borrower or its own name, or
otherwise, to take possession of and endorse (without recourse) and collect any
checks, drafts, notes, acceptances or other instruments for the payment of
moneys due under the Collateral or any Account, Instrument or General Intangible
arising thereunder and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate by the
Lender for the purpose of collecting any and all such moneys due under the
Collateral or any Account, Instrument or General Intangible arising thereunder;
(iii) upon the occurrence and during the continuance
of any Event of Default, to pay or discharge taxes and liens levied or placed on
the Collateral and to execute any and all documents and instruments that may be
necessary or desirable to accomplish the purposes hereof; and
(iv) upon the occurrence and during the continuance
of any Event of Default, (A) to direct any party liable for any payment under
any of the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Lender or as the Lender shall direct, (B) to ask or
demand for, collect, receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral, (C) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of the Collateral, (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any part thereof and to enforce any other right in
respect of any Collateral, (E) to defend any suit, action or proceeding brought
against the Borrower with respect to any Collateral, (F) to settle, compromise
or adjust any suit, action or proceeding described in clause (E) above and, in
connection therewith, to give such discharges or releases
7
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as the Lender may deem appropriate and (G) generally, to sell, transfer, pledge
and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Lender were the absolute owner
thereof for all purposes, and to do, at the Lender's option and the Borrower's
expense, at any time, or from time to time, all acts and things that the Lender
deems necessary to protect, preserve or realize upon the Collateral and the
liens thereon and security interest therein created and continued hereby and to
effect the intent of this Agreement, all as fully and effectively as the
Borrower might do.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Borrower also authorizes the Lender, at
------------
any time and from time to time, to execute, in connection with any sale provided
for herein, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
2.6.6 Performance by Lender of Borrower's Obligations. The Lender may,
-----------------------------------------------
immediately upon the occurrence and during the continuance of an Event of
Default and without limiting any rights or powers granted herein to the Lender
and without releasing the Borrower from any obligation, covenant or condition
hereof, make any payment or perform or cause the performance of any such
obligation, covenant or condition or take any other action in such manner and to
such extent as the Lender may deem necessary to protect, perfect or continue the
perfection of the liens and security interests created or continued or intended
to be created or continued pursuant to this Agreement.
2.6.7 Lender's Duties. The powers conferred on the Lender hereunder
---------------
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. The Lenders shall have no duty as to
any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. The
Lender's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Lender deals
with similar securities and property for its own account. Neither the Lender nor
any of its directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Borrower or otherwise.
2.6.8 Security Interest Absolute. All rights of the Lender hereunder,
--------------------------
the liens and security interests created and continued hereby and all
obligations of the Borrower hereunder shall be absolute and unconditional
irrespective of:
(a) any change in the time, manner or place of payment of, or in
any other term of the Loan, or any other amendment or waiver of or any consent
to any departure from any documents delivered in connection with the
transactions contemplated by this Agreement; or
8
<PAGE>
(b) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or consent to or
departure from any guaranty, for all or any of the Loan.
2.6.9 Continuing Pledge and Security Interest. This Agreement
---------------------------------------
shall constitute a continuing pledge of and security interest in the Collateral
and shall (a) remain in full force and effect until payment in full of the Loan
and (b) be binding upon, and inure to the benefit of, the parties hereto and
their respective successors and assigns.
2.6.10 Powers Coupled with An Interest. All authorizations,
-------------------------------
agencies and powers herein contained with respect to the Collateral are
irrevocable and are coupled with an interest.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents and warrants to and for the benefit of the Lender
as follows:
Section 3.1 Existence. The Borrower is a limited liability company,
---------
organized, validly existing and in good standing under the Legal Requirements of
the State of Delaware and is duly qualified to do business in all states where
such qualification is necessary in connection with the transactions contemplated
hereby.
Section 3.2 Power, Authorization and No Conflicts. Each of the Borrower and
-------------------------------------
its Members has all requisite power and authority and the legal right to conduct
its business and operations as they are currently being conducted and as
proposed to be conducted by it. The execution, delivery and performance by the
Borrower of this Agreement and the other Credit Documents to which the Borrower
is a party (i) are within the Borrower's and the Members' powers, (ii) have been
duly authorized by all necessary organizational and legal action, and (iii) do
not contravene the operating agreement or certificate of organization of the
Borrower, or any Legal Requirement applicable to the Borrower, or restriction
binding on or affecting the Borrower or its Members or any of their respective
assets, or result in the creation of any mortgage, pledge, lien or encumbrance
upon any of their respective assets other than as provided by the terms
thereof.
Section 3.3 Governmental Authorizations and Other Approvals. The Borrower
-----------------------------------------------
has all necessary Governmental Actions and qualifications, and has complied in
all material respects with all applicable Legal Requirements necessary to
conduct its business as it is presently conducted and to own and operate its
facilities in accordance with the provisions of the Credit Documents. No
authorization, approval or other action by, and no notice to or filing with, any
Governmental Authority is required for the due execution, delivery and
performance by the Borrower of this Agreement or the other Credit Documents to
which the Borrower is a party, except such as have been obtained or are not
issuable on or before the date of execution and delivery of this Agreement.
9
<PAGE>
SECTION 3.4 VALIDITY AND BINDING EFFECT. This Agreement and the other
---------------------------
Credit Documents to which the Borrower is a party are the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms, subject to the application by a court of
general principles of equity and to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar Legal Requirement affecting
creditors' rights generally.
SECTION 3.5 NO LITIGATION. Except as disclosed to the Lender in writing,
-------------
there is no threatened action or proceeding (pending or threatened in writing)
(a) affecting the Borrower before any Governmental Authority or arbitrator
which, in any case, might materially and adversely affect the business,
operations, assets, condition (financial or otherwise) or prospects of the
Borrower, or the validity or enforceability of this Agreement or the other
Credit Documents or (b) affecting the Bonds or any documents related to the
Bonds.
SECTION 3.6 NO VIOLATIONS. The Borrower is in compliance with, and not in
-------------
breach of or default under (a) any applicable Legal Requirements of the United
States or any other Governmental Authority or (b) the Credit Documents or any
other credit agreement, indenture, mortgage, agreement or other instrument to
which it is a party or otherwise subject. No event has occurred and is
continuing which, with the passage of time or the giving of notice or both,
would constitute an event of default under any such instrument except for
violations, if any, which the Borrower has disclosed to the Lender in writing
and is proceeding in good faith to remove or correct.
SECTION 3.7 NOTICES UNDER BOND DOCUMENTS. To the best of its actual
----------------------------
knowledge, the Borrower has not received any notices of default, notices of
redemption, other notices, reports, filings, or other correspondence relating to
the Bonds, from any trustee for the holders of the Bonds or any Governmental
Authority, except as shall have been disclosed by the Borrower to the Lender in
writing.
SECTION 3.8 OWNERSHIP OF COLLATERAL; LIENS. The Borrower is the legal and
------------------------------
beneficial owner of the Collateral, free and clear of all liens and security
interests, except for the liens and security interests created by this
Agreement. The Borrower has all requisite power and authority and the legal
right to pledge to the Lender, and to grant to the Lender, a first priority lien
on and continuing first priority security interest in the Collateral. No
security agreement, financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public office,
except such as may have been filed in favor of the Lender pursuant to this
Agreement.
SECTION 3.9 SECURITY INTEREST. The security interests granted and
-----------------
continued pursuant to this Agreement constitute perfected first priority
security interests in the Collateral in favor of the Lender and are enforceable
as such against all creditors of and purchasers from the Borrower. All action
necessary or desirable to perfect such security interests in each item of the
Collateral requested by the Lender, including the filing of financing statements
in all appropriate public offices, has been or will be duly taken.
SECTION 3.10 SOLVENCY. The Borrower is and, after giving effect to this
--------
Agreement and all other agreements of the Borrower being entered into on the
date of execution and delivery
10
<PAGE>
of this Agreement, will be solvent (which for this purpose shall mean that the
fair market value of its property is in excess of the total amount of its debts
and that it is able to pay its debts as they mature).
Section 3.11 Principal Place of Business, Etc. The Borrower's principal
--------------------------------
place of business, chief executive office and the office where the Borrower
keeps its records concerning transactions contemplated hereby are located at 439
North Bedford Drive, Beverly Hills, California 90210, Attention: Daniel
Gottlieb, Chief Executive Officer.
Section 3.12 Tax Returns and Payments. The Borrower has filed all tax
------------------------
returns required to be filed by it and has paid (a) all taxes and assessments
payable by it which have become due and (b) all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority,
other than those not yet delinquent or those that are reserved against in
accordance with GAAP which are being diligently contested in good faith by
appropriate proceedings. No tax lien has been filed against the Borrower.
Section 3.13 Investment Company Act; Public Utility Holding Company Act.
----------------------------------------------------------
The borrower is not (a) an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended, (b) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of either a "holding company" or a "subsidiary
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (c) subject to any other federal or state law or regulation which
purports to restrict or regulate its ability to borrow money.
ARTICLE 4.
GENERAL COVENANTS
So long as the Indebtedness remains outstanding, the Borrower covenants
and agrees that, except to the extent the Lender shall otherwise consent in
writing, each of the following covenants shall be performed and complied with by
the Borrower as indicated:
Section 4.1 Payment of Principal, Interest and Fees. The Borrower shall
---------------------------------------
duly and punctually pay to the Lender the principal of and interest on the Note
as and when same shall be due and payable in accordance with and subject to the
terms of this Agreement and the terms of the Note.
Section 4.2 Payment of Additional Sums. The Borrower shall duly and
--------------------------
punctually repay to the Lender according to the terms of this Agreement, any
additional sums advanced, or expended by the Lender for the Borrower's account,
together with interest on such sums at the Default Rate.
Section 4.3 Performance of Credit Documents. The Borrower shall observe,
-------------------------------
perform and discharge all covenants, conditions and obligations of the Borrower
contained in the provisions of the Credit Documents in accordance with their
respective terms.
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SECTION 4.4 COMPLIANCE WITH LEGAL REQUIREMENTS. The Borrower will comply
----------------------------------
with all applicable Legal Requirements.
SECTION 4.5 MAINTENANCE OF GOVERNMENTAL AUTHORIZATIONS. The Borrower will
------------------------------------------
maintain in full force and effect all of its Governmental Actions and
qualifications necessary for the conduct of its business as it is presently
being conducted and the ownership and operation of its facilities as they are
presently being operated. The Borrower will promptly furnish copies of all
reports and correspondence relating to a loss or proposed revocation of any such
qualification to the Lender.
SECTION 4.6 ACTIONS UNDER BOND DOCUMENTS. The Borrower shall provide the
----------------------------
Lender with true, correct and complete copies of all notices, reports, filings
or correspondence received by the Borrower under the Bonds or the related
documents or otherwise relating to the Bonds as soon as practicable and in no
event later than five (5) Business Days following receipt thereof by the
Borrower. The Borrower has not and shall not, without the prior written consent
of the Lender, consent to any amendment of the Bonds or the documents related
thereto or any waiver of any provisions thereof or direct any action or exercise
any remedies thereunder.
SECTION 4.7 INSPECTION RIGHTS. The Borrower will, at any reasonable time
-----------------
and from time to time, permit the Lender or its agents or representatives to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Borrower, and to discuss the affairs,
finances and accounts of the Borrower and accountants of the Borrower.
SECTION 4.8 KEEPING OF BOOKS. The Borrower will keep proper books of record
----------------
and account in which full and correct entries shall be made of financial
transactions and the assets and operations of the Borrower prepared in
accordance with GAAP consistently applied, and have a complete audit of such
books of record and account made by the Accountant for each Fiscal Year.
SECTION 4.9 TAX RETURNS. The Borrower will timely file all required tax
-----------
returns, pay when due all taxes imposed on its operations, assets, income or
properties (or file extensions), and, upon request, provide to the Lender copies
of such returns and receipts for payment of such taxes.
ARTICLE 5.
CONDITIONS PRECEDENT
SECTION 5.1 PAYMENT OF CERTAIN FEES AND EXPENSES. As a condition precedent
------------------------------------
to the Lender's making the Loan, on the date of execution and delivery of this
Agreement, (a) Borrower shall have paid the Loan Fee to GMAC, and (b) the Lender
shall have received, in immediately available funds, an amount equal to the
costs and expenses set forth in SECTION 7.5 incurred as of the date of the
-----------
execution and delivery hereof.
12
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Section 5.2 Documentation. As conditions precedent to the Lender's
-------------
making the Loan, the Lender shall have received, or waived the receipt of, each
of the following in form and substance satisfactory to the Lender:
5.2.1 Duly executed counterpart originals of this Agreement,
the Note, the Assignment of Bonds, and all documentation delivered in connection
therewith.
5.2.2 Such other documents, certificates, approvals,
assurances and opinions as the Lender may request.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 Defaults. Each of the following shall constitute an event of
--------
default hereunder ("Event of Default"):
6.1.1 Failure by the Borrower to pay (i) the entire
outstanding Loan evidenced by the Note on the Maturity Date of the Note, or (ii)
any other amount within five (5) Business Days of the date when it is due under
this Agreement or any of the other Credit Documents;
6.1.2 Failure by the Borrower to perform or comply with any
of the other terms or conditions contained in this Agreement or any of the other
Credit Documents and continuance of such failure for thirty (30) days after the
earlier of written notice from the Lender to the Borrower or the Borrower has
actual knowledge that such failure has occurred, or such longer period to which
the Lender may agree in the case of a default not curable by the exercise of due
diligence within such thirty (30) day period, provided that the Borrower shall
have commenced to cure such default within such 30 day period and shall complete
such cure as quickly as reasonably possible with the exercise of due diligence;
6.1.3 Any of the representations or warranties of the
Borrower set forth in this Agreement, any of the other Credit Documents or any
other document furnished to the Lender pursuant to the terms hereof proves to
have been false or misleading in any respect when made; provided, however, that
Borrower shall have an opportunity to cure in order to make such representations
or warranties not false or misleading;
6.1.4 The Borrower (i) applies for or consents to the
appointment of a receiver, trustee, liquidator or custodian or the like of
itself or of its property or (ii) admits in writing its inability to pay its
debts generally as they become due, or (iii) makes a general assignment for the
benefit of creditors, or (iv) is adjudicated a bankrupt or insolvent, or (v)
commences a voluntary case under the United States Bankruptcy Code or files a
voluntary petition or answer seeking reorganization, an arrangement with
creditors or an order for relief or seeking to take advantage of any insolvency
law or files an answer admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization or insolvency proceeding, or it
takes action for the purpose of effecting any of the foregoing, or (vi) has
instituted against it, without its application, approval or consent, a
proceeding in any court of
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competent jurisdiction, under any Legal Requirements relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking an order for relief or
an adjudication in bankruptcy, reorganization, dissolution, winding up or
liquidation, a composition or arrangement with creditors, a readjustment of
debts, the appointment of a trustee, receiver, liquidator or custodian or the
like of the it or all of any substantial part of its assets or other like relief
in respect thereof under any Legal Requirements relating to bankruptcy or
insolvency law, and, if such proceeding is being contested by it in good faith,
the same (A) results in the entry of an order for relief of any such
adjudication or appointment or (B) remains undismissed and undischarged for a
period of sixty (60) days; or
6.1.5 The occurrence of an Event of Default under any of the
Credit Documents;
Section 6.2 Remedies. If an Event of Default has occurred and has
--------
continued uncured for five (5) Business Days after notice thereof from the
Lender (provided that in no event shall Lender be required to give more than one
such notice of Default during any 12-month period), the Lender may:
6.2.1 Exercise any of the rights and remedies available to it
under the Credit Documents; and
6.2.2 Declare the Borrower's obligations hereunder and under
the other Credit Documents to be, whereupon the entire Loan shall become,
immediately due and payable without presentment, demand, protest or notice of
any kind, all of which are expressly waived by the Borrower; and
6.2.3 Exercise, or cause to be exercised, any and all such
remedies or rights as it may have under this Agreement or the other Credit
Documents or any other document or at law or in equity.
Section 6.3 No Waiver; Remedies Cumulative. No failure on the part of the
------------------------------
Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; and no single or partial exercise of any right
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies available under any other document or at law or in
equity.
Section 6.4 Rights and Remedies in Collateral.
---------------------------------
6.4.1 If an Event of Default shall have occurred and be
continuing, (a) all payments made in respect of the Collateral and received by
or on behalf of the Lender in accordance with the provisions of this Agreement
or otherwise, may, in the discretion of the Lender, (i) be held by or on behalf
of the Lender as Collateral, and/or (ii) then or at any time thereafter be
applied to the Loan in such order as the Lender shall determine, and (b) to the
extent permitted by applicable Legal Requirements, the Bonds and any other
certificates or evidences of the Collateral shall be registered in the name of
the Lender or its nominee, and (whether or not so registered) the Lender or its
nominee may thereafter exercise (i) all voting and other rights pertaining to
the Collateral and (ii) any and all rights of conversion, exchange,
14
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subscription and any other rights, privileges or options pertaining to the
Collateral as if it were the absolute owner thereof all without liability except
to account for property actually received by it, but the Lender shall have no
duty to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
6.4.2 If an Event of Default shall have occurred and be
continuing, then, in addition to any other rights and remedies provided for
herein and in any other instrument or agreement securing, evidencing or relating
to the Loan, or that may otherwise be available, the Lender may without any
demand, advertisement or notice (except as expressly provided for below in this
Section 6.4.2), exercise all the rights and remedies of a secured party under
- -------------
the UCC, and in addition may sell, lease, assign, give option or options to
purchase, or otherwise dispose of the Collateral, or any part thereof, as
hereinafter provided. The Collateral may be sold or otherwise disposed of in
one or more sales, at public or private sale, conducted by any officer or agent
of, or auctioneer or attorney for, the Lender, at any exchange or broker's board
or at the Lender's place of business or elsewhere, for cash, upon credit or for
other property, for immediate or future delivery, and at such price or prices
and on such terms as the Lender shall, in its sole discretion, deem appropriate.
The Lender may be the purchaser of any or all of the Collateral so sold at a
sale and thereafter may hold the same, and the obligations of the Borrower
and/or the Partnership, to such purchaser may be applied as a credit against the
purchase price. The Lender may, in its sole discretion, at any such sale
restrict the prospective bidders or purchasers as to their number, nature of
business and investment intention. Upon any such sale, the Lender shall have
the right to deliver, assign and transfer to the purchaser thereof (including
the Lender) the Collateral so sold, absolutely free from any claim or right of
whatsoever kind, including any equity or right of redemption, of the
Borrower, and the Borrower hereby specifically waives, to the fullest extent it
may lawfully do so, all rights of redemption, stay or appraisal that it has or
may have under any rule of law or statute now existing or hereafter adopted.
The Borrower agrees that the Lender need not give more than ten (10) days,
notice of the time and place of any public sale or of the time after which a
private sale or other intended disposition is to take place and that such notice
is reasonable notification of such matters. No notification need be given to
the Borrower if it has signed after the occurrence of an Event of Default a
statement renouncing or modifying any right to notification of sale or other
intended disposition. Any such public sale shall be held at such time or times
within ordinary business hours as the Lender shall fix in the notice of such
sale. At any such sale, the Collateral may be sold in one lot as an entirety or
in separate parcels. The Lender shall not be obligated to make any sale
pursuant to any such notice. The Lender may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for such sale, and any such
sale may be made at any time or place to which the same may be so adjourned
without further notice or publication. In case of any sale of all or any part
of the Collateral on credit or for future delivery, the Collateral so sold may
be retained by the Lender until the full selling price is paid by the purchaser
thereof, but the Lender shall not incur any liability in case of the failure of
such purchaser to take up and pay for the Collateral so sold, and, in case of
any such failure, such Collateral may again be sold pursuant to the provisions
hereof.
6.4.3 If an Event of Default shall have occurred and be
continuing, instead of exercising the power of sale provided in Section 6.4.2
-------------
hereof, the Lender may
15
<PAGE>
proceed by a suit or suits at law or in equity to foreclose the pledge and
security interest under this Agreement and sell the Collateral or any portion
thereof under a judgment or decree of a court or courts of competent
jurisdiction.
6.4.4 The Lender, as attorney-in-fact pursuant to Section 2.6.6
-------------
hereof,may, in the name and stead of the Borrower, make and execute all
conveyances, assignments and transfers of the Collateral sold pursuant to
Section 6.4.2 or Section 6.4.3 hereof, and, to the extent permitted
- ------------- -------------
by applicable law, the Borrower hereby ratifies and confirms all that the
Lender, as said attorney-in-fact, shall do by virtue hereof. Nevertheless, the
Borrower shall, if so requested by the Lender, ratify and confirm any sale or
sales by executing and delivering to the Lender, or to such purchaser or
purchasers, all such instruments as may, in the judgment of the Lender, be
advisable for the purpose.
6.4.5 The receipt of the Lender for the purchase money paid at such
sale made by it pursuant to Sections 6.4.2 or 6.4.3 hereof shall be sufficient
-----------------------
discharge therefore to any purchaser of the Collateral, or any portion thereof,
sold as aforesaid; and no such purchaser (or the representatives or assigns of
such purchaser), after paying such purchase money and receiving such receipt,
shall be bound to see to the application of such purchase money or any part
thereof or in any manner whatsoever be answerable for any loss, misapplication
or non-application of any such purchase money, or any part thereof, or be bound
to inquire as to the authorization, necessity, expediency or regularity of any
such sale.
6.4.6 The Lender shall not incur any liability as a result of the
sale of the Collateral, or any part thereof, at any private sale pursuant to
Section 6.4.2 hereof conducted in a commercially reasonable manner. The Borrower
- -------------
hereby waives, to the fullest extent permitted by applicable law, all claims,
damages and demands against the Lender arising out of the repossession or
retention of the Collateral or the sale of the Collateral pursuant to Section
-------
6.4.2 or 6.4.3 hereof, including, without limitation, any claims against the
- --------------
Lender arising by reason of the fact that the price at which the Collateral, or
any part thereof, may have been sold at a private sale was less than the price
that might have been obtained at a public sale or was less than the aggregate
amount of the obligations, even if the Lender accepts the first offer received
that the Lender in good faith deems to be commercially reasonable under the
circumstances and does not offer the Collateral to more than one offeree. To the
fullest extent permitted by the law, the Borrower shall have the burden of
proving that any such sale of the Collateral was conducted in a commercially
unreasonable manner.
6.4.7 If the Lender shall demand possession of any Collateral or any
part thereof not already in its possession in connection with its rights
pursuant to Sections 6.4.2 or 6.4.3 hereof, the Borrower will, at its own
-----------------------
expense, forthwith cause such Collateral or any part thereof designated by the
Lender to be assembled and made available and/or delivered to the Lender at any
place reasonably designated by the Lender.
6.4.8 No Sale or other disposition of all or any part of the
Collateral by the Lender pursuant to this Section 6.4 shall he deemed to relieve
-----------
the Borrower of its obligations in respect of any Indebtedness except to the
extent the proceeds thereof are applied by the Lender to the payment of such
Indebtedness.
16
<PAGE>
Section 6.5 Waiver. To the fullest extent it may lawfully so agree, the
------
Borrower agrees that it will not at any time insist upon, claim, plead or take
any benefit or advantage of any appraisement, valuation, stay, extension,
moratorium, redemption, or similar law now or hereinafter in force in order to
prevent, delay, or hinder the enforcement hereof or the absolute sale of any
part of the Collateral. The Borrower for itself and all who claim through it, so
far as it or they now or hereafter lawfully may do so, hereby waives the benefit
of all such laws, and all right to have the Collateral marshaled upon any
foreclosure hereof, and agrees that any court having jurisdiction to foreclose
this Agreement may order the sale of the Collateral as an entirety. Without
limiting the generality of the foregoing, the Borrower hereby; (a) authorizes
the Lender, in its sole discretion and without notice to or demand upon the
Borrower and without otherwise affecting the obligations of the Borrower
hereunder or in respect of the Loan, from time to time to take and hold other
collateral (in addition to the Collateral) for payment of any obligations, or
any part thereof, and to exchange, enforce or release such other collateral or
any part thereof and to accept and hold any endorsement or guarantee of payment
of the Loan or any part thereof and to release or substitute any endorser or
guarantor or any other Person granting security for or in any other way
obligated upon the obligations or any part thereof; and (b) waives and releases
any and all right to require the Lender to collect any of the Loan from any
specific item or items of the Collateral or from any other party liable as
guarantor or in any other manner in respect of any of the obligations or from
any collateral (other than such Collateral) for any of the obligations.
Section 6.6 Specific Performance. The Borrower hereby irrevocably waives,
--------------------
to the extent that it may do so under Applicable Law, any defense based on the
adequacy of a remedy at law that may be asserted as a bar to the remedy of
specific performance in any action brought against the Borrower for specific
performance of this Agreement by the Lender or in respect of all or a
substantial part of the Borrower's assets under the bankruptcy or insolvency
laws of any jurisdiction to which the Borrower or its assets are subject.
Section 6.7 Private Sales. The Borrower recognizes that the Lender may
-------------
be unable to effect a public sale of any or all the Collateral, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire the Collateral for their own account
for investment and not with a view to the distribution thereof. The Borrower
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable to the Lender than if such sale were a public sale
and agrees that such circumstances shall not, in and of themselves, result in a
determination that such sale was not made in a commercially reasonable manner.
ARTICLE 7.
MISCELLANEOUS
Section 7.1 Notices. All notices and other communications provided for
-------
hereunder shall be in writing and sent by United States certified or registered
mail, return receipt requested, or by telegraph, telex, telecopier or private
delivery service, addressed as follows:
17
<PAGE>
If to the Borrower:
GLN Capital Co., LLC
439 North Bedford Drive
Beverly Hills, California 90210
Attn: Danial M. Gottlieb, Chief Executive Officer
and:
Property Acquisition Trust I
c/o Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, NY 10281-1198
Attn: Gregory Anderson
with a copy to:
Jay L. Zagoren, Esquire
Dechert Price & Rhoads
Princeton Price Corporate Center
997 Lenox Drive
Building Three, Suite 210
Lawrenceville, NJ 08748
and:
Nomura Asset Capital Corporation
Two World Financial Center, Building B,
New York, NY 10281-1198
Attn: Sheryl McAfee
and:
Nomura Asset Capital Corporation
Two World Financial Center, Building B,
New York, NY 10281-1198
Attn: Legal Counsel
If to the Lender:
G & L Realty Partnership, L.P.
439 North Bedford Drive
Beverly Hills, CA 90210
Attn: Daniel M. Gottlieb, Chief Executive Officer
with a copy to:
Martin H. Blank, Jr., Esquire
11755 Wilshire Boulevard, Suite 1400
Los Angeles, California, 90025
18
<PAGE>
Either party hereto and the Lender may change the address to which notices to
it are to be sent by written notice given to the other persons listed in this
Section. All notices shall, when mailed as aforesaid, be effective on the date
indicated on the return receipt, and all notices given by other means shall be
effective when received.
Section 7.2 Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and shall be binding upon the parties hereto and their respective
successors and assigns. The Lender may assign its rights under this Agreement
without the consent of the Borrower or any other person. The Borrower may not
assign its rights under this Agreement without the prior written consent of the
Lender (which consent shall not be unreasonably withheld). The Borrower and the
Lender intend that no person other than the parties hereto, and their successors
and assigns as permitted hereunder shall have any claim or interest under this
Agreement or right of action hereon or hereunder.
Section 7.3 Survival of Covenants. All covenants made by the Borrower
---------------------
herein and in any document delivered pursuant hereto shall survive the
termination of this Agreement.
Section 7.4 Counterparts. The execution hereof by each party hereto shall
------------
constitute a contract between them for the uses and purposes herein set forth,
and this Agreement may be executed in any number of counterparts, with each
executed counterpart constituting an original and all counterparts together
constituting one agreement.
Section 7.5 Costs, Expenses and Taxes. The Borrower agrees to pay on demand
-------------------------
all reasonable costs and expenses of the Lender in connection with the
preparation, execution, and delivery of this Agreement, the other Credit
Documents and any other documents that may be delivered in connection with this
Agreement, including, the reasonable fees and expenses of counsel for the
Lender. In addition, the Borrower shall pay any and all stamp and other taxes,
recording fees, taxes (other than the Lender's income taxes) and charges and all
other fees and charges payable or determined to be payable in connection with
the execution and delivery of this Agreement, the other Credit Documents and
such other documents. The Borrower agrees to indemnify and to hold the Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees; provided that
the Lender promptly notifies the Borrower of any such taxes and fees.
Section 7.6 Amendments. This Agreement may be amended only by an instrument
----------
in writing executed and delivered by the Borrower and the Lender.
Section 7.7 Severability; Interest Limitation. If any provision hereof is
---------------------------------
found by a court of competent jurisdiction to be prohibited or unenforceable in
any jurisdiction, it shall be ineffective as to such jurisdiction only to the
extent of such prohibition or unenforceability, and such prohibition or
unenforceability shall not invalidate the balance of such provision as to such
jurisdiction to the extent it is not prohibited or unenforceable, nor invalidate
such provision in any other jurisdiction, nor invalidate the other provisions
hereof, all of which shall be liberally construed in favor of the Lender in
order to effect the provisions of this Agreement. Notwithstanding anything to
the contrary herein contained, the total liability of the Borrower for payment
of interest pursuant hereto shall not exceed the maximum amount, if any, of such
interest permitted by applicable Legal Requirements to be contracted for,
charged or received,
19
<PAGE>
and if any payments by the Borrower to the Lender include interest in excess of
such a maximum amount, the Lender shall apply such excess to the reduction of
the unpaid principal amount due pursuant hereto, or if none is due, such excess
shall be refunded to the Borrower; provided that, to the extent permitted by
applicable Legal Requirements, in the event the interest is not collected, is
applied to principal or is refunded pursuant to this sentence and interest
thereafter payable pursuant hereto shall be less than such maximum amount, then
such interest thereafter so payable shall be increased up to such maximum amount
to the extent necessary to recover the amount of interest, if any, theretofore
uncollected, applied to principal or refunded pursuant to this sentence. Any
such application or refund shall not cure or waive any Event of Default. In
determining whether or not any interest payable under this Agreement exceeds the
highest rate permitted by applicable Legal Requirements, any nonprincipal
payment (except payments specifically stated in this Agreement to be "interest")
shall be deemed, to the extent permitted by applicable Legal Requirements, to be
an expense, fee, premium or penalty rather than interest.
SECTION 7.8 CONFLICTS. Insofar as possible the provisions of this
---------
Agreement shall be deemed complementary to the terms of the other Credit
Documents, but in the event of conflict the terms hereof shall control to the
extent such are enforceable under applicable Legal Requirements.
SECTION 7.9 CONSENT TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. ALL
----------------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST THE BORROWER ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK, COUNTY AND CITY OF LOS ANGELES. BY EXECUTING AND DELIVERING THIS
AGREEMENT, THE BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
IRREVOCABLY
7.9.1 ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
7.9.2 WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
7.9.3 AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO THE BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SECTION 7.1, IN THE EVENT SERVICE OF PROCESS IN PERSON CANNOT BE MADE AFTER
- -----------
THREE (3) DAYS;
7.9.4 AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE BORROWER IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT.
7.9.5 AGREES THAT THE LENDER RETAINS THE RIGHT TO SERVICE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
20
<PAGE>
PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION; AND
7.9.6 AGREES THAT THE PROVISIONS OF THIS SECTION 7.9 RELATING TO
-----------
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT
PERMISSIBLE UNDER APPLICABLE NEW YORK LAW.
THE BORROWER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION
ARISING HEREUNDER OR UNDER THIS AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS,
OR OTHERWISE IN CONNECTION HEREWITH.
Section 7.10 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Section 7.11 Headings. 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.
Section 7.12 Further Assurances. The Borrower will execute and deliver
------------------
such further instruments and perform such further acts as may be requested by
the Lender from time to time to confirm the provisions of this Agreement and the
other Credit Documents, and/or to confirm the priority and/or perfection of any
lien, pledge, assignment or security interest created or intended to be created
by this Agreement in any property, rights or interests of the Borrower. The
Borrower agrees to pay all costs of any such acts required to be taken by the
Borrower hereunder including, the recording, filing and acknowledging of such
documents in such public offices as the Lender may require.
Section 7.13 Reinstatement. This Agreement shall continue to be effective,
-------------
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any of the indebtedness is rescinded or must otherwise be restored
or returned by the Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or any substantial part of their property, or
otherwise, all as though such payments had not been made.
Section 7.14 Indemnity. The Borrower shall indemnify the Lender from and
---------
against any and all claims, losses and liabilities growing out of or resulting
from (i) the Agreement (including, without limitation, enforcement of this
Agreement) and (ii) the transactions contemplated solely by this Agreement, but,
in the case of each of clauses (i) and (ii), excluding any such claims, losses
or liabilities found by a final order of a court of competent jurisdiction to
result from the Lender's gross negligence or willful misconduct.
Section 7.15 Waivers; Consents. No waiver of, or consent with respect to,
-----------------
any provision of this Agreement shall in any event be effective unless the same
shall be in writing
21
<PAGE>
and signed by the Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: GLN CAPITAL CO., LLC
- -------- a Delaware limited liability company
By: G & L REALTY PARTNERSHIP, L.P.
a Delaware limited partnership
Its Member
By: G & L REALTY CORP., a Maryland corporation
Its General Partner
By /s/ Daniel M. Gottlieb
----------------------------------------------
Daniel M. Gottlieb, Chief Executive Officer
By: PROPERTY ACQUISITION TRUST I,
a Delaware business trust
Its Member
By /s/ Sheryl McAffee
--------------------------------------
Name Sheryl McAffee
------------------------------------
Title Attorney-in-fact
-----------------------------------
LENDER: G & L REALTY PARTNERSHIP, L.P.,
- ------ a Delaware limited partnership
By: G & L Realty Corp., a Maryland corporation
Its General Partner
By /s/ Daniel M. Gottlieb
---------------------------------------------
Daniel M. Gottlieb, Chief Executive Officer
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,153,000
<SECURITIES> 0
<RECEIVABLES> 33,574,000
<ALLOWANCES> 1,624,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 104,452,000
<DEPRECIATION> 12,046,000
<TOTAL-ASSETS> 138,018,000
<CURRENT-LIABILITIES> 2,801,000
<BONDS> 0
0
15,000
<COMMON> 40,000
<OTHER-SE> 56,176,000
<TOTAL-LIABILITY-AND-EQUITY> 138,018,000
<SALES> 0
<TOTAL-REVENUES> 6,268,000
<CGS> 0
<TOTAL-COSTS> 1,501,000
<OTHER-EXPENSES> 1,491,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,834,000
<INCOME-PRETAX> 1,282,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,282,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,282,000
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0
</TABLE>
