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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-12588
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ALEXANDER HAAGEN PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MARYLAND 95-4444963
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3500 SEPULVEDA BOULEVARD, MANHATTAN BEACH, CALIFORNIA 90266
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(310) 546-4520
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, PAR
VALUE $.01 PER
SHARE AMERICAN STOCK EXCHANGE
7 1/2% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2001, SERIES A AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE REGISTERED
(TITLE OF CLASS)
----------------
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 at least the past 90 days. YES [X] NO [_].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $319,615,000 (computed on the basis of $16.875
per share), which was the last sale price on the American Stock Exchange on
March 30, 1998.
As of March 30, 1998, 18,955,158 shares of Common Stock, Par Value $.01 Per
Share, were outstanding.
LIST OF DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates by reference information from the
Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission within 120 days of the close of Registrant's fiscal year.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
PART I
<C> <S> <C>
1. BUSINESS........................................................... 1
2. PROPERTIES......................................................... 3
3. LEGAL PROCEEDINGS.................................................. 15
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 15
PART II
5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS............................................................ 16
6. SELECTED FINANCIAL DATA............................................ 17
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.............................................. 18
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 25
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE............................................... 47
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................. 47
11. EXECUTIVE COMPENSATION............................................. 47
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 47
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 47
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K... 47
</TABLE>
<TABLE>
<S> <C>
SIGNATURES.................................................................. S-1
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
Alexander Haagen Properties, Inc., a Maryland corporation (the "Company"),
is a self-administered and self-managed real estate investment trust. The
Company engages in the ownership, management, leasing, acquisition,
development and redevelopment of retail shopping centers in the Western United
States.
As of December 31, 1997, the Company owned a portfolio comprised of
interests in 46 retail shopping centers (the "Properties"). See "Item 2--
Properties." All of the Properties and assets in the Company's portfolio are
held and operated by Alexander Haagen Properties Operating Partnership, L.P.,
a California limited partnership (the "Operating Partnership" or "OP") and
Alexander Haagen Properties Finance Partnership, L.P. (the "Finance
Partnership"). The Company is the sole general partner of the Operating
Partnership and owns a 79.1% interest therein. The Company owns 100% of the
Finance Partnership and is its sole general partner while the Operating
Partnership is its sole Limited Partner. The Company conducts substantially
all of its operations through the Operating Partnership and generally has
full, exclusive and complete responsibility and discretion in the management
and control of the Operating Partnership.
On June 1, 1997 the Company entered into a Stock Purchase Agreement with LF
Strategic Realty Investors, L.P. and Prometheus Western Retail, LLC,
affiliates of Lazard Freres Real Estate Investors, LLC, (together "LFREI"),
providing for LFREI to invest a total of up to $235 million in Common Stock of
the Company (the "Transaction"). Pursuant to the Stock Purchase Agreement the
Company will sell an aggregate of 15,666,666 shares of Common Stock to LFREI
at a price of $15.00 per share, for an aggregate purchase price of $235
million (the "Total Equity Commitment"). The purchase price per share was
determined as a result of arm's length negotiations between the Company and
its advisors and LFREI and its advisors. On August 14, 1997, the Stockholders
of the Company approved the Transaction.
As of December 31, 1997, the Company had sold 4,006,434 shares, to LFREI
under the terms of the Transaction for aggregate proceeds of $60.1 million. On
February 13, 1998 the Company sold an additional 2,700,000 shares to LFREI. As
of February 13, 1998, LFREI is obligated to purchase a further 8,960,232
Shares of Common Stock for aggregate proceeds of $134.4 million (the
"Remaining Equity Commitment"). As of such date, LFREI owned approximately
35.4% of the outstanding Common Stock.
The Company must sell the Remaining Equity Commitment not later than
February 14, 1999. If the Company has not drawn the Remaining Equity
Commitment by such date, LFREI will have the right on such date to purchase
such shares from the Company, at a price of $15.00 per share. If LFREI
acquires all of the shares represented by the Remaining Equity Commitment (and
assuming no other change in the number of outstanding shares), LFREI will own
approximately 56.3% of the outstanding Common Stock (37.9% on a Diluted
Basis).
Subject to certain restrictions, in the event that the Company issues or
sells shares of capital stock for cash, LFREI will be entitled to purchase or
subscribe for, either as part of such issuance or in a concurrent issuance,
that portion of the total number of shares to be issued equal to LFREI's
proportionate holdings of Common Stock prior to such issuance (but not to
exceed 37.5% of the offering).
For a period of five years following stockholder approval (the "Standstill
Period") and any Standstill Extension Term, LFREI and its affiliates may not
(i) acquire beneficial ownership of more than 49.9% of the outstanding shares
of Common Stock, on an Adjusted Fully Diluted Basis (as defined below), (ii)
sell, transfer or otherwise dispose of any shares of Common Stock except in
accordance with certain specified limitations (including a requirement that
the Company, in its sole and absolute discretion, approve any transfer in a
negotiated transaction that would result in the transferee beneficially owning
more than 9.8% of the Company's capital stock). As used herein, the term
Adjusted Fully Diluted Basis shall mean on a Diluted Basis, except that shares
of Common Stock issuable upon conversion of the Company's outstanding
convertible debt or upon exercise of options granted under management benefit
plans shall not be included. After giving effect to the sale
1
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of 15,666,666 shares to LFREI, and assuming no other change in the number of
outstanding shares, LFREI will own 49.0% of the Common Stock on an Adjusted
Fully Diluted Basis. In the event that the number of outstanding shares were
to increase for any reason (including as a result of issuance of Common Stock
upon conversion or exercise of the outstanding convertible debt or management
stock options), then LFREI would be allowed to acquire additional shares of
Common Stock, up to 49.9% on an Adjusted Fully Diluted Basis. In addition to
the above, LFREI has the right to nominate four members to the Company's Board
of Directors. Further, LFREI is entitled to receive access to certain
operating statements and other financial reports used in operating the Company
on a monthly basis.
On November 24, 1997, the Company entered into an agreement (the "Separation
Agreement") with Alexander Haagen, Sr., Charlotte Haagen and Alexander Haagen,
III (collectively the "Haagen Family") in connection with their retirement
from the Company. Under the terms of the Separation Agreement, the Haagen
Family received $2.7 million in cash, vesting of all granted stock options and
restricted stock awards, and the granting and vesting of previously committed
restricted stock awards. In addition, for certain defined periods the Company
agreed to continue to provide the Haagen Family certain medical benefits and
administrative assistance. During 1997, the Company recorded a non-recurring
charge of $9.4 million in connection with the Separation Agreement. Further,
the Company has agreed to purchase, or cause to have purchased, substantially
all of the Haagen Family's ownership interests in the Company on May 25, 1999.
Through December 31, 1997, leasing and other property management functions
were conducted at all of the Properties by Haagen Property Management, Inc., a
California corporation ("HPMI"), pursuant to management agreements between the
Operating Partnership, the Finance Partnership, and HPMI. As of December 31,
1997, HPMI employed a staff of 102 full-time real estate professionals with
extensive experience, knowledge of local markets and an established track
record with national, regional and local retailers. The Company believes that
the expertise and relationships developed by these professionals enhance the
Company's ability to attract and retain high quality tenants. The Company
owned all of the outstanding non-voting preferred stock of HPMI, representing
a 95% economic interest in HPMI. All of the outstanding voting common stock of
HPMI, representing a 5% economic interest in HPMI, was held by certain
executive officers of the Company. On December 31, 1997, the Company acquired
the remaining 5% economic interest in HPMI by acquiring all of the voting
common stock of HPMI. As of such date, all of the employees of HPMI became
employees of the Operating Partnership. All of the assets and liabilities of
HPMI have been consolidated into the Company as of December 31, 1997.
The Company operates so as to qualify as a real estate investment trust
("REIT") under Sections 856-860 of the Internal Revenue Code. Under those
sections of the Internal Revenue Code, the Company must distribute annually to
its stockholders at least 95% of its taxable income and must meet certain
other asset and income tests. Dividends to stockholders from a qualified REIT
are deductible by such REIT in calculating its income tax liability. As a
result, pre-tax income of the Company flows through to its stockholders who
are taxed on the income on their individual income tax returns, thus
eliminating the "double taxation" inherent in regular corporations. REITs are
subject to a number of organizational and operational requirements. If the
Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates. Even if the Company
qualifies for taxation as a REIT, the Company may be subject to certain
federal, state and local taxes on its income and property.
The Company competes with commercial developers, real estate companies,
pension funds and other real estate investors, many of which have greater
financial resources than the Company, in seeking land for development,
properties for acquisition and tenants for leasing of properties. There are
numerous shopping centers that compete with the Properties in attracting
retailers to lease space. In addition, retailers at the Properties face
increasing competition from outlet malls, discount shopping clubs, direct mail
and telemarketing.
2
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ITEM 2. PROPERTIES
As of December 31, 1997, the Properties consisted of 22
neighborhood/community shopping centers, 8 promotional/power centers, 2
regional malls and 14 single tenant facilities, containing in the aggregate
approximately 9.0 million square feet of total gross leasable area ("GLA").
Approximately 7.2 million square feet of GLA is owned by the Company, and the
balance is owned by certain anchor retailers. The Company believes that
management's attention to quality, design and aesthetics, tenant mix and other
specific community needs position a number of the Properties among the premier
retail shopping centers in their respective communities. The majority of the
Properties are located throughout Southern California, including 14 in
Los Angeles County, 5 in San Diego County, 3 in Orange County, 2 in San
Bernardino County, 2 in Riverside County, 1 in Imperial County and 1 in
Ventura County. Based on published industry sources, the Company believes that
the geographic concentration of the Properties establishes it as one of the
leading fully integrated owners, managers and developers of retail shopping
centers in the Western United States. In addition to its Southern California
Properties the Company has 7 Properties in Northern and Central California, 3
Properties in Arizona, 3 Properties in Oregon and 5 Properties in Washington.
The Company's single tenant facilities range in size from approximately
36,800 square feet of total GLA to approximately 135,000 square feet of total
GLA. The Company's neighborhood/community shopping centers and
promotional/power centers range in size from approximately 66,000 square feet
of total GLA to approximately 626,000 square feet of total GLA. The Company's
regional malls range in size from approximately 810,000 square feet of GLA to
approximately 1,232,000 square feet of GLA).
The Properties are designed to attract local and regional area customers and
are typically anchored by one or more nationally or regionally known
retailers. Depending on the market focus of a specific Property, major
retailers at a Property may include value-oriented discount stores,
supermarkets, membership warehouses, traditional department stores, fashion-
oriented department stores, shops or well-known specialty retailers. Several
of the Properties contain an entertainment component such as a theater
multiplex. Anchor leases are typically for initial terms of 10 to 35 years,
with one or more renewal options available to the lessee upon expiration of
the initial term. By contrast, smaller shop leases are typically for 5 to 10
year terms. The longer term of the anchor leases helps to protect the Company
against significant vacancies and to insure the presence of anchor retailers
who draw consumers to the Company's retail centers. The shorter term of the
smaller shop leases allows the Company to adjust rental rates for non-anchor
store space on a regular basis and upgrade the overall tenant mix. Anchor
leases are generally for lower base rents than leases for smaller shop
tenants. The lower base rents paid by anchor retailers may be offset, in part,
through periodic escalations and/or the payment of percentage rents. Certain
anchor retailers at some of the Properties occupy space not owned by the
Company and therefore do not pay base rent to the Company.
During 1997, the Company substantially completed construction at its two
Redevelopment Properties. At Covina Town Square, the former Sears was
demolished and replaced with a 95,150 square foot building which has been
leased to AMC Theatres that opened for business in February 1998. Medford
Center in Medford, Oregon was transformed from an enclosed mall to an open air
power center comprising 340,867 square feet of GLA, of which 84,000 is still
under construction.
3
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Also, during 1997, the Company implemented an acquisition strategy
designated to expand its portfolio of unenclosed anchored shopping centers in
the Western United States. As a result of its acquisition strategy, the
Company acquired 8 properties in 1997, aggregating approximately 848,000
square feet of GLA, with an aggregate purchase price of $91 million. The
acquisitions consisted of the following:
<TABLE>
<CAPTION>
COMPANY
OWNED
DATE ACQUIRED PROPERTY NAME LOCATION GLA
------------- ------------- -------- -------
<S> <C> <C> <C>
August 11, 1997.......... Ross Center Portland, OR 132,465
August 11, 1997.......... Pacific Linen Lynwood, WA 69,432
August 11, 1997.......... Vancouver Park Place Vancouver, WA 77,989
October 31,1997.......... Frontier Village Lake Stevens, WA 153,433
December 9, 1997......... Marshall's Plaza Modesto, CA 79,000
December 19, 1997........ Rheem Valley Moraga, CA 158,093
December 26, 1997........ Silverdale Shopping Center Silverdale, WA 67,290
December 31, 1997........ Westgate North Tacoma, WA 110,251
</TABLE>
Subsequent to December 31, 1997 the Company acquired eight properties,
aggregating approximately 1,052,000 square feet of GLA, with an aggregate
purchase price of $114 million. The acquisitions consist of the following:
<TABLE>
<CAPTION>
COMPANY
OWNED
DATE ACQUIRED PROPERTY NAME LOCATION GLA
------------- ------------- -------- -------
<S> <C> <C> <C>
January 20, 1998... Covington Square Kent, WA 155,370
March 11, 1998..... Pavilions Centre Federal Way, WA 200,191
March 27, 1998..... Bakersfield Shopping Center Bakersfield, CA 14,115
March 27, 1998..... Center of El Centro El Centro, CA 179,189
March 27, 1998..... Loma Square San Diego, CA 210,704
March 27, 1998..... Vineyards Market Place Rancho Cucamonga, CA 56,035
March 27, 1998..... North County Plaza Carlsbad, CA 153,325
March 31, 1998..... Southpointe Plaza Sacramento, CA 83,409
</TABLE>
The acquisitions were principally funded through proceeds from the sale of
common stock to LFREI and borrowings on the Company's Secured Line of Credit.
During 1996, the Company sold 2 of its single tenant facilities for
aggregate net proceeds of $6.3 million. In June 1996, the Company sold the
Vons market located in Ventura, California for $2.8 million. In October 1996,
the Company sold its property in Rancho Cucamonga for $3.5 million. The
property was leased to Dayton-Hudson and had been vacant for several years.
The proceeds from the sales were used to reduce borrowings on the Company's
credit facility and to retire mortgage indebtedness secured by one of the
properties.
Thirty-seven of the Properties are owned by the Company in fee and 9 are
held by the Company under long-term ground leases. Included in the long-term
ground leases are the Partially-Owned Properties, in which the Company owns,
directly or indirectly, partnership interests (75% in Kenneth Hahn Plaza and
34% in Vermont-Slauson Shopping Center).
4
<PAGE>
DESCRIPTION OF PROPERTIES
The following table summarizes certain information with respect to the
Properties as of December 31, 1997.
<TABLE>
<CAPTION>
YEAR OF TOTAL
CONSTRUCTION SHOPPING GLA
(OR MOST OWNERSHIP LAND CENTER COMPANY GLA TO BE AVAILABLE ANCHOR OR
RECENT INTEREST AREA GLA OWNED GLA BUILT FOR LEASE PRINCIPAL
PROPERTY NAME RENOVATION) (EXPIRATION)(1) (ACRES) (SQ. FT.) (SQ. FT.) (SQ. FT.) (SQ. FT.) TENANTS
------------- ------------ --------------- ------- --------- --------- --------- --------- ---------
<C> <C> <C> <C> <C> <C> <C> <C> <S>
STABILIZED PROPERTIES
REGIONAL MALLS
Baldwin Hills Crenshaw 1988 Fee 42.0 809,980 349,980 -- 349,980 Sears(2),
Plaza.................... Robinson's-
(Los Angeles, CA) May(2),
Macy's(2),
Lucky,
TJ Maxx,
Sony/Magic
Johnson Theatres
Media City Center........ 1992 Ground Lease 37.1 1,231,670 802,060 -- 802,060 Macy's, IKEA(2),
(Burbank, CA) (2078) ----- --------- --------- ------- --------- Sears(2),
Mervyn's(2),
AMC Theatres,
Sport Chalet,
CompUSA,
Barnes & Noble,
Virgin Megastore
Subtotal Regional Malls.. 79.1 2,041,650 1,152,040 -- 1,152,040
----- --------- --------- ------- ---------
PROMOTIONAL/POWER CENTERS
El Camino North.......... 1982 Fee 54.0 451,301 324,801 -- 324,801 Mervyn's(2),
(Oceanside, CA) Toys 'R' Us(2),
Montgomery
Ward(3), Mann
Theatres, Ross
Stores
Empire Center............ 1993 Fee 60.5 626,496 261,996 4,645 266,641 Target(2),
(Fontana, CA) Mervyn's(2),
Miller's
Outpost,
Ross Store, Gap
Old Navy
Fullerton Town Center.... 1987 Fee 21.7 391,347 278,647 278,647 Price Club(2),
(Fullerton, CA) AMC Theatres,
Toys 'R' Us,
Office Depot,
Aaron Bros. Art
Mart
Gresham Town Fair........ 1988 Fee 25.6 264,649 264,649 -- 264,649 Ross Stores,
(Gresham, OR) Emporium, GI
Joes,
Craft Warehouse
Montebello Town Square... 1992 Fee 24.5 250,438 250,438 -- 250,438 Sears, Toys 'R'
(Montebello, CA) Us, AMC
Theatres, Petco
The City Center.......... (1992) Fee 6.8 194,193 194,193 -- 194,193 Toys 'R' Us,
(San Francisco, CA) ----- --------- --------- ------- --------- Mervyn's, Office
Depot,
Good Guys
Subtotal 193.1 2,178,424 1,574,724 4,645 1,579,369
Promotional/Power ----- --------- --------- ------- ---------
Centers..................
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
Advantage/Sportmart (1988) Fee 10.3 117,860 117,860 -- 117,860 Advantage
Shopping Center.......... (Lucky),
(San Diego, CA) SportMart
Country Fair Shopping 1992 Fee 17.3 211,807 168,367 -- 168,367 Albertson's(2),
Center................... PETsMART,
(Chino, CA) Thrifty,
Staples, T.J.
Maxx
Date Palm Center......... 1987 Fee 11.0 117,362 117,362 4,000 121,362 SAM's Club (Wal-
(Cathedral City, CA) Mart)
Fire Mountain Center..... 1987 Fee/Ground Lease 9.4 93,778 93,778 -- 93,778 Strouds, Lamps
(Oceanside, CA) (2038) Plus, Trader
Joe's,
Bookstar, Aaron
Bros. Art Mart
Frontier Village Shopping 1993 Fee 15.7 153,320 153,320 -- 153,320 Safeway, Bartell
Center................... Drugs
(Lake Stevens, WA)
</TABLE>
5
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<TABLE>
<CAPTION>
YEAR OF TOTAL
CONSTRUCTION SHOPPING GLA
(OR MOST OWNERSHIP LAND CENTER COMPANY GLA TO BE AVAILABLE ANCHOR OR
RECENT INTEREST AREA GLA OWNED GLA BUILT FOR LEASE PRINCIPAL
PROPERTY NAME RENOVATION) (EXPIRATION)(1) (ACRES) (SQ. FT.) (SQ. FT.) (SQ. FT.) (SQ. FT.) TENANTS
------------- ------------ --------------- ------- --------- --------- --------- --------- ---------
<C> <C> <C> <C> <C> <C> <C> <C> <S>
Gardena Gateway Center......... 1990 Fee 9.7 65,987 65,987 -- 65,987 Thrifty, 99
(Gardena, CA) Ranch Market
Huntington Center.............. (1989) Ground Lease 3.9 110,244 110,244 -- 110,244 Toys 'R' Us,
(Huntington Beach, CA) (2032) Lucky
Kenneth Hahn Plaza............. 1987 Ground Lease 14.5 162,665 162,665 6,500 169,165 Food 4 Less,
(Los Angeles, CA) (2052) Pic'N'Save,
Thrifty,
L.A. County
Library, Super
Trak Auto
La Verne Towne Center.......... 1986 Fee 19.1 231,143 231,143 -- 231,143 Target,
(La Verne, CA) Albertson's,
Michael's
Lakewood Plaza................. (1989) Ground Lease 11.1 113,511 113,511 -- 113,511 Lucky Stores,
(Bellflower, CA) (2032) Staples
Marshall's Plaza .............. 1989 Fee 5.0 86,200 79,000 -- 79,000 Marshall's, Good
(Modesto, CA) Guys
Pacific Linen Plaza............ 1988 Fee 4.6 69,432 69,432 -- 69,432 Pacific Linen,
(Lynnwood, WA) Payless
Shoesource
Men's Wearhouse
Parkway Place.................. (1989) Ground Lease 9.7 118,920 118,920 -- 118,920 Advantage
(Escondido, CA) (2037) (Lucky), Office
Depot
Pomona Gateway Center.......... (1993) Fee 9.8 108,887 108,887 -- 108,887 Vons, Pic'N'Save
(Pomona, CA)
Rheem Valley................... 1990 Fee 18.4 178,157 153,786 -- 153,786 T.J. Maxx, Longs
(Moraga, CA) Drugs
Rosedale Village Shopping 1991 Fee 10.6 217,006 127,527 -- 127,527 Savemart,
Center........................ Payless Drugs,
(Bakersfield, CA) Kmart(2)
Ross Center.................... 1987 Fee 10.0 132,465 132,465 -- 132,465 Ross Stores,
(Portland, OR) Michael's, Pier
1 Imports
San Fernando Mission Plaza..... 1991 Fee 4.9 67,192 67,192 -- 67,192 KV-Mart (Vons)
(San Fernando, CA)
Silverdale Shopping Center 1990 Fee 6.0 67,330 67,330 -- 67,330 Ross Stores
(Ross Plaza)..................
(Silverdale, WA)
Vancouver Park Place........... 1987 Fee 6.4 77,989 77,989 -- 77,989 T.J. Maxx, Pier
(Vancouver, WA) 1 Imports,
Olive Garden
Vermont-Slauson Shopping 1981 Ground Lease 10.3 169,744 169,744 -- 169,744 Ralph's Market,
Center........................ (2070) Kmart, Sav-On
(Los Angeles, CA) Drugs
Westgate North Shopping Center. 1980 Fee 13.3 112,592 110,251 -- 110,251 Quality Food
(Tacoma, WA) ----- --------- --------- ------- --------- Centers
Subtotal Neighborhood/Community
Shopping Centers ............. 231.0 2,783,591 2,616,760 10,500 2,627,260
----- --------- --------- ------- ---------
SINGLE TENANT FACILITIES
Home Base...................... (1988) Fee 8.7 107,165 107,165 -- 107,165 Home Base
(Glendora, CA)
Kmart.......................... 1990 Fee 8.7 104,204 104,204 -- 104,204 Kmart
(Phoenix, AZ)
Kmart.......................... 1990 Fee 8.8 86,479 86,479 -- 86,479 Kmart
(Banning, CA)
</TABLE>
6
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<TABLE>
<CAPTION>
YEAR OF TOTAL
CONSTRUCTION SHOPPING GLA
(OR MOST OWNERSHIP LAND CENTER COMPANY GLA TO BE AVAILABLE ANCHOR OR
RECENT INTEREST AREA GLA OWNED GLA BUILT FOR LEASE PRINCIPAL
PROPERTY NAME RENOVATION) (EXPIRATION)(1) (ACRES) (SQ. FT.) (SQ. FT.) (SQ. FT.) (SQ. FT.) TENANTS
------------- ------------ --------------- ------- --------- --------- --------- --------- ---------
<C> <C> <C> <C> <C> <C> <C> <C> <S>
Kmart.................... 1990 Fee 9.1 86,479 86,479 -- 86,479 Kmart
(El Centro, CA)
Kmart.................... 1990 Fee 6.8 86,479 86,479 -- 86,479 Kmart
(Los Banos, CA)
Kmart.................... 1990 Fee 6.2 86,479 86,479 -- 86,479 Kmart
(Madera, CA)
Kmart.................... 1990 Fee 8.3 86,479 86,479 -- 86,479 Kmart
(Rocklin, CA)
Oracle Road.............. (1989) Fee 8.1 102,400 102,400 -- 102,400 Montgomery Ward
(Tucson, AZ)
SAM's Club............... (1988) Ground Lease 9.8 114,722 114,722 -- 114,722 SAM's Club (Wal-
(Downey, CA) (2009) Mart)
SAM's Club............... (1988) Fee 11.5 119,126 119,126 -- 119,126 SAM's Club (Wal-
(Fountain Valley, CA) Mart)
Sears.................... (1992) Fee 4.3 134,644 134,644 -- 134,644 Sears
(Hollywood, CA)
Smitty's................. (1992) Fee 8.5 106,265 106,265 -- 106,265 Smitty's
(Tucson, AZ)
Vons..................... (1989) Fee 3.5 36,800 36,800 -- 36,800 Vons
(Escondido, CA)
Vons..................... (1993) Ground Lease 9.8 102,400 102,400 -- 102,400 Vons
(Simi Valley, CA) (2023) ----- --------- --------- ------- ---------
Subtotal Single Tenant 112.1 1,360,121 1,360,121 -- 1,360,121
Facilities............... ----- --------- --------- ------- ---------
SUBTOTAL STABILIZED 615.3 8,363,786 6,703,645 15,145 6,718,790
PROPERTIES............... ----- --------- --------- ------- ---------
REDEVELOPMENT PROPERTIES
PROMOTIONAL/POWER CENTERS
Covina Town Square....... (1997) Fee 35.5 256,367 256,367 103,150 359,517 Home Depot,
(Covina, CA) --------- Staples,
PETsMART,
Michael's, AMC
Theatres(4)
Medford Center........... (1997) Fee 30.1 341,733 256,987 83,880 340,867 Cinemark
(Medford, OR) ----- --------- --------- ------- --------- Theaters, Sears,
Emporium,
Payless(2),
Safeway(2),
Circuit City
SUBTOTAL REDEVELOPMENT 65.6 598,100 513,354 187,030 700,384
PROPERTIES............... ----- --------- --------- ------- ---------
TOTAL ALL PROPERTIES..... 680.9 8,961.886 7,216,999 202,175 7,419,174
===== ========= ========= ======= =========
</TABLE>
- -----
(1) The date indicated is the expiration date of any ground lease after giving
effect to all renewal periods.
(2) Anchor space not owned by the Company.
(3) Tenant has vacated space subsequent to December 31, 1997.
(4) Tenant opened for business subsequent to December 31, 1997. Space is
reflected as GLA to be Built as of December 31, 1997.
7
<PAGE>
PROPERTY PERFORMANCE SUMMARY
The following table sets forth, on a property-by-property basis, the GLA
leased to anchor tenants, pad tenants and shop tenants, as of December 31,
1997:
<TABLE>
<CAPTION>
ANCHOR PAD SHOP GLA TO AVERAGE
GLA(1) GLA(2) GLA(3) AVAILABLE BE BUILT ANNUALIZED BASE ANNUAL
(SQ. (SQ. (SQ. GLA (SQ. TOTAL GLA PERCENT BASE RENT PERCENTAGE
PROPERTY NAME FT.) FT.) FT.) (SQ. FT.) FT.) (SQ. FT.) LEASED(4) RENT(5) PSF(6) RENT(7)
------------- ------- ------- ------- --------- -------- --------- --------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STABILIZED PROPERTIES
REGIONAL MALLS
Baldwin Hills Crenshaw
Plaza.................. 131,930 33,810 146,936 37,304 -- 349,980 89.3 $ 5,948,426 $19.02 $ 95,873
Media City Center...... 451,616 48,984 239,108 62,352 -- 802,060 92.2 11,885,750 16.07 150,033
------- ------- ------- ------- ----- --------- ----------- --------
Subtotal Regional
Malls................. 583,546 82,794 386,044 99,656 -- 1,152,040 91.3 17,834,176 16.95 245,906
------- ------- ------- ------- ----- --------- ----------- --------
PROMOTIONAL/POWER
CENTERS
El Camino North........ 114,840 127,611 71,273 11,077 -- 324,801 96.6 3,694,024 11.77 21,310
Empire Center.......... 62,637 15,690 83,313 100,356 4,645 266,641 61.7 1,714,173 10.60 --
Fullerton Town Center.. 177,653 19,722 60,510 20,762 -- 278,647 92.5 3,828,872 14.85 --
Gresham Town Fair...... 159,282 26,587 72,904 5,876 -- 264,649 97.8 2,080,785 8.04 41,908
Montebello Town Square. 210,533 7,879 27,064 4,962 -- 250,438 98.0 2,754,203 11.22 --
The City Center........ 177,584 -- 14,055 2,554 -- 194,193 98.7 2,601,321 13.57 --
------- ------- ------- ------- ----- --------- ----------- --------
Subtotal
Promotional/Power
Centers............... 902,529 197,489 329,119 145,587 4,645 1,579,369 90.8 16,673,378 11.67 63,218
------- ------- ------- ------- ----- --------- ----------- --------
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
Advantage/Sportmart
Shopping Center........ 105,210 12,650 -- -- -- 117,860 100.0 1,304,668 11.07 3,387
Country Fair Shopping
Center................. 85,725 27,341 26,311 28,990 -- 168,367 82.8 1,814,547 13.02 18,455
Date Palm Center....... 99,919 -- 15,044 2,399 4,000 121,362 98.0 1,738,558 15.12 --
Fire Mountain Center... 44,481 23,432 24,665 1,200 -- 93,778 98.7 1,690,373 18.26 92,495
Frontier Village
Shopping Center........ 68,473 22,023 61,624 1,200 -- 153,320 99.2 1,492,242 9.81 --
Gardena Gateway Center. 41,300 5,062 19,625 -- -- 65,987 100.0 998,838 15.14 6,249
Huntington Center...... 105,879 4,365 -- -- -- 110,244 100.0 1,174,979 10.66 --
Kenneth Hahn Plaza..... 97,186 11,798 36,225 17,456 6,500 169,165 89.3 1,378,987 9.50 --
La Verne Towne Center.. 158,860 1,940 46,835 23,508 -- 231,143 89.8 1,245,287 6.00 773
Lakewood Plaza......... 93,342 4,365 14,354 1,450 -- 113,511 98.7 1,248,458 11.14 --
Marshall's Plaza....... 43,000 -- 34,875 1,125 -- 79,000 98.6 1,087,388 13.96 --
Pacific Linen Plaza.... 25,000 -- 40,147 4,285 -- 69,432 93.8 855,811 13.14 --
Parkway Place.......... 91,127 12,917 9,270 5,606 -- 118,920 95.3 1,193,309 10.53 10,198
Pomona Gateway Center.. 96,418 6,487 2,492 3,490 -- 108,887 96.8 916,561 8.70 --
Rheem Valley........... 51,009 5,150 92,556 5,071 -- 153,786 96.7 1,619,708 10.89 --
Rosedale Village....... 72,324 6,658 45,879 2,666 -- 127,527 97.9 1,345,584 10.78 --
Ross Center............ 53,331 7,000 69,377 2,757 -- 132,465 97.9 1,473,247 11.36 --
San Fernando Mission
Plaza.................. 50,508 2,293 14,391 -- -- 67,192 100.0 895,422 13.33 --
Silverdale Shopping
Center................. 29,020 -- 32,722 5,588 -- 67,330 91.7 701,235 11.36 --
Vancouver Park Place... 33,938 14,900 27,421 1,730 -- 77,989 97.8 851,972 11.17 17,400
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PAD GLA TO AVERAGE
ANCHOR GLA(2) SHOP AVAILABLE BE BUILT ANNUALIZED BASE ANNUAL
GLA(1) (SQ. GLA(3) GLA (SQ. TOTAL GLA PERCENT BASE RENT PERCENTAGE
PROPERTY NAME (SQ. FT.) FT.) (SQ. FT.) (SQ. FT.) FT.) (SQ. FT.) LEASED(4) RENT(5) PSF(6) RENT(7)
------------- --------- ------- --------- --------- -------- --------- --------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vermont-Slauson
Shopping Center..... 142,411 3,720 23,613 -- -- 169,744 100.0 981,232 5.78 --
Westgate North
Shopping Center..... 37,902 13,336 55,513 3,500 -- 110,251 96.8 1,138,288 10.66 148
--------- ------- --------- ------- ------- --------- ----------- --------
Subtotal
Neighborhood/Community
Shopping Centers... 1,626,363 185,437 692,939 112,021 10,500 2,627,260 95.7 27,146,694 10.84 149,105
--------- ------- --------- ------- ------- --------- ----------- --------
SINGLE TENANT
FACILITIES
Home Base........... 107,165 -- -- -- -- 107,165 100.0 870,180 8.12 --
Kmart (Banning, CA). 86,479 -- -- -- -- 86,479 100.0 457,744 5.29 --
Kmart (El Centro,
CA)................. 86,479 -- -- -- -- 86,479 100.0 507,915 5.87 --
Kmart (Los Banos,
CA)................. 86,479 -- -- -- -- 86,479 100.0 365,373 4.22 --
Kmart (Madera, CA).. 86,479 -- -- -- -- 86,479 100.0 415,951 4.81 --
Kmart (Phoenix, AZ). 104,204 -- -- -- -- 104,204 100.0 551,576 5.29 --
Kmart (Rocklin, CA). 86,479 -- -- -- -- 86,479 100.0 411,132 4.75 --
Oracle Road......... 102,400 -- -- -- -- 102,400 100.0 537,600 5.25 --
SAM's Club (Downey,
CA)................. 110,822 3,900 -- -- -- 114,722 100.0 730,884 6.37 105,860
SAM's Club (Fountain
Valley, CA)......... 110,784 8,342 -- -- -- 119,126 100.0 1,058,990 8.89 85,974
Sears............... 134,644 -- -- -- -- 134,644 100.0 401,785 2.98 --
Smitty's............ 103,025 3,240 -- -- -- 106,265 100.0 348,134 3.28 --
Vons (Escondido,
CA)................. 36,800 -- -- -- -- 36,800 100.0 312,800 8.50 --
Vons (Simi Valley,
CA)................. 102,400 -- -- 102,400 100.0 825,418 8.06 --
--------- ------- --------- ------- ------- --------- ----------- --------
Subtotal Single
Tenant Facilities.. 1,344,639 15,482 -- -- -- 1,360,121 100.0 7,795,482 5.73 191,834
--------- ------- --------- ------- ------- --------- --------
SUBTOTAL STABILIZED
PROPERTIES......... 4,457,077 481,202 1,408,102 357,264 15,145 6,718,790 94.7 69,449,730 10.94 650,063
--------- ------- --------- ------- ------- --------- ----------- --------
REDEVELOPMENT
PROPERTIES
PROMOTIONAL/POWER
CENTERS
Covina Town Square.. 171,233 6,500 49,654 28,980 103,150 359,517 88.7 4,552,039 14.11 92,125
Medford Center...... 191,578 9,432 51,577 4,400 83,880 340,867 98.3 1,906,294 7.55 220,826
--------- ------- --------- ------- ------- --------- ----------- --------
SUBTOTAL
REDEVELOPMENT
PROPERTIES 362,811 15,932 101,231 33,380 187,030 700,384 93.5 6,458,333 11.23 312,951
--------- ------- --------- ------- ------- --------- ----------- --------
TOTAL ALL
PROPERTIES.......... 4,819,888 497,134 1,509,333 390,644 202,175 7,419,174 94.6 $75,908,063 $10.96 $963,014
========= ======= ========= ======= ======= ========= =========== ========
PERCENT OF TOTAL
GLA................. 64.96% 6.70% 20.34% 5.27% 2.73% 100.00%
========= ======= ========= ======= ======= =========
</TABLE>
- ----
(1) Anchor tenants are defined as those retail tenants occupying more than
25,000 square feet of GLA, 10% of a Property's aggregate GLA, or which
represent a significant drawing power for the Property.
(2) "Pad" tenants means freestanding single tenants.
(3) Includes certain office space.
(4) Based upon Total GLA, excluding GLA to be built.
(5) Total annualized base rents of the Company for leases signed as of
December 31, 1997, excluding (i) percentage rents, (ii) additional amounts
payable by tenants such as common area maintenance, real estate taxes and
other expense reimbursements and (iii) future contractual rent escalations
or cost of living increases.
(6) Calculated as total annualized base rent divided by GLA actually leased as
of December 31, 1997.
(7) Annual percentage rent for the most recently reported 12-month period.
9
<PAGE>
The following table sets forth, as of December 31, 1997, square footage of
GLA at each Property leased to national, regional and local retail tenants:
<TABLE>
<CAPTION>
TYPE OF RETAIL TENANT
--------------------------------------------
PROPERTY NAME NATIONAL(1) REGIONAL(2) LOCAL(3) TOTAL
------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
STABILIZED PROPERTIES
REGIONAL MALLS
Baldwin Hills Crenshaw Plaza..... 169,952 27,277 115,447 312,676
Media City Center................ 527,367 79,316 133,025 739,708
PROMOTIONAL/POWER CENTERS
El Camino North.................. 160,624 45,354 107,746 313,724
Empire Center.................... 75,151 36,831 49,658 161,640
Fullerton Town Center............ 195,682 19,385 42,818 257,885
Gresham Town Fair................ 65,538 54,463 138,772 258,773
Montebello Town Square........... 216,056 15,061 14,359 245,476
The City Center.................. 186,214 -- 5,425 191,639
NEIGHBORHOOD/COMMUNITY SHOPPING
CENTERS
Advantage/Sportmart Shopping
Center.......................... 110,210 4,275 3,375 117,860
Country Fair Shopping Center..... 96,736 12,805 29,836 139,377
Date Palm Center................. 101,144 -- 13,819 114,963
Fire Mountain Center............. 65,710 7,500 19,368 92,578
Frontier Village Shopping Center. 65,429 7,333 79,358 152,120
Gardena Gateway Center........... 24,362 22,000 19,625 65,987
Huntington Center................ 105,879 -- 4,365 110,244
Kenneth Hahn Plaza............... 114,828 6,898 23,483 145,209
La Verne Towne Center............ 183,659 8,937 15,039 207,635
Lakewood Plaza................... 99,331 7,525 5,205 112,061
Marshall's Plaza................. 59,294 8,863 9,718 77,875
Pacific Linen Plaza.............. 22,279 32,536 10,332 65,147
Parkway Place.................... 107,928 1,034 4,352 113,314
Pomona Gateway Center............ 17,680 85,225 2,492 105,397
Rheem Valley..................... 82,650 2,539 63,526 148,715
Rosedale Village Shopping Center. 41,426 44,870 38,565 124,861
Ross Center...................... 75,759 8,912 45,037 129,708
San Fernando Mission Plaza....... 5,913 56,949 4,330 67,192
Silverdale Shopping Center (Ross
Plaza).......................... 42,055 5,147 14,540 61,742
Vancouver Park Place............. 59,661 5,270 11,328 76,259
Vermont-Slauson Shopping Center.. 155,210 2,350 12,184 169,744
Westgate North Shopping Center... 10,504 44,152 52,095 106,751
SINGLE TENANT FACILITIES
Home Base........................ 107,165 -- -- 107,165
Kmart (Banning, CA).............. 86,479 -- -- 86,479
Kmart (El Centro, CA)............ 86,479 -- -- 86,479
Kmart (Los Banos, CA)............ 86,479 -- -- 86,479
Kmart (Madera, CA)............... 86,479 -- -- 86,479
Kmart (Phoenix, AZ).............. 104,204 -- -- 104,204
Kmart (Rocklin, CA).............. 86,479 -- -- 86,479
Oracle Road...................... 102,400 -- -- 102,400
SAM's Club (Downey, CA).......... 110,822 -- 3,900 114,722
SAM's Club (Fountain Valley, CA). 119,126 -- -- 119,126
Sears (Hollywood, CA)............ 134,644 -- -- 134,644
Smitty's (Tucson, AZ)............ 3,240 103,025 -- 106,265
Vons (Escondido, CA)............. -- 36,800 -- 36,800
Vons (Simi Valley, CA)........... -- 102,400 -- 102,400
--------- ------- --------- ---------
SUBTOTAL STABILIZED PROPERTIES... 4,358,227 895,032 1,093,122 6,346,381
--------- ------- --------- ---------
REDEVELOPMENT PROPERTIES
PROMOTIONAL/POWER CENTERS
Covina Town Square............... 191,431 -- 35,956 227,387
Medford Center................... 156,658 61,899 34,030 252,587
--------- ------- --------- ---------
SUBTOTAL REDEVELOPMENT
PROPERTIES...................... 348,089 61,899 69,986 479,974
--------- ------- --------- ---------
TOTAL ALL PROPERTIES............. 4,706,316 956,931 1,163,108 6,826,355
========= ======= ========= =========
PERCENT OF TOTAL LEASED GLA...... 68.94% 14.02% 17.04% 100.00%
========= ======= ========= =========
</TABLE>
- --------
(1) National tenant refers to a business operating in three or more
metropolitan areas located in at least three separate states.
(2) Regional tenant refers to a business operating in more than one
metropolitan area in one or two states. Includes financial institutions.
(3) Local tenant refers to a business operating in only one metropolitan area.
10
<PAGE>
The following table sets forth, as of December 31, 1997 the annualized base
rent of all of the Properties, the percentage of annualized base rent, the
average rent per square foot and the percentage leased, broken down by type of
tenant:
<TABLE>
<CAPTION>
AVERAGE
% OF TOTAL ANNUAL BASE
ANNUALIZED ANNUALIZED RENT PER PERCENT
TYPE OF SPACE BASE RENT BASE RENT SQUARE FOOT LEASED
- ------------- ----------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Anchor.............................. $42,664,816 54.79% $ 8.68 98.60%
Pad................................. 6,918,087 9.41% 13.92 88.44%
Shop................................ 26,325,160 35.80% 17.41 85.43%
----------- ------ ------ -----
TOTAL.............................. $75,908,063 100.00% $10.96 94.60%
=========== ====== ====== =====
</TABLE>
TENANT CONCENTRATION
The following table sets forth, as of December 31, 1997 information as to
anchor and/or national retail tenants which individually accounted for at
least 1.0% of total annualized base rent of the Properties:
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL TOTAL
NUMBER ANNUALIZED ANNUALIZED TENANT PERCENTAGE
RETAIL TENANT(1) OF STORES BASE RENT BASE RENT GLA OF TOTAL GLA
---------------- --------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
AMC Theatres(2)......... 6 $ 5,899,895 7.77% 259,842 3.60%
SAM's Club/Wal-Mart
Stores................. 3 3,138,834 4.14 321,525 4.46
Lucky Stores, Inc....... 5 3,081,453 4.06 308,170 4.27
Kmart Corp.............. 7 2,927,871 3.86 619,103 8.58
Vons Companies, The..... 4 2,305,718 3.04 270,568 3.75
Toys 'R' Us............. 4 2,018,462 2.66 199,710 2.77
Sears Roebuck & Co...... 3 1,368,774 1.80 312,537 4.33
Magic Johnson Theaters.. 1 1,241,943 1.64 57,955 0.80
The Limited Stores...... 8 1,169,530 1.54 63,457 0.88
Ross Dress for Less..... 5 1,110,610 1.46 145,012 2.01
Office Depot............ 4 1,107,518 1.46 100,247 1.39
Dayton Hudson
(Mervyn's/Target)...... 2 1,031,500 1.36 198,138 2.75
Montgomery Ward(3)...... 3 972,872 1.28 152,640 2.12
Payless ShoeSource,
Inc.................... 11 936,694 1.23 42,822 0.59
TJX..................... 4 903,520 1.19 105,697 1.46
Home Base............... 1 870,180 1.15 107,165 1.48
Federated Department
Stores................. 1 832,542 1.10 220,800 3.06
Home Depot.............. 1 805,000 1.06 102,485 1.42
Sport Chalet Sporting
Goods.................. 1 775,508 1.02 44,957 0.62
Staples, Inc............ 3 756,042 1.00 69,935 0.97
--- ----------- ----- --------- -----
TOTAL................. 77 $33,254,466 43.81% 3,702,765 51.31%
=== =========== ===== ========= =====
</TABLE>
- --------
(1) Excludes non-owned Anchors.
(2) Includes a 95,150 square foot complex located at Covina Town Square which
opened in February 1998.
(3) Montgomery Ward at El Camino North vacated its space subsequent to
December 31, 1997.
11
<PAGE>
TENANT LEASE EXPIRATIONS AND RENEWALS
The following table sets forth, as of December 31, 1997, tenant lease
expirations for the next ten years at the Properties, assuming that no tenants
exercise renewal options:
<TABLE>
<CAPTION>
APPROX. AVERAGE BASE PERCENT OF
GLA OF RENT PER TOTAL LEASED
NO. OF EXPIRING ANNUALIZED BASE SQUARE FOOT SQUARE FOOTAGE
LEASES LEASES RENT OF UNDER REPRESENTED BY
LEASE EXPIRATION YEAR EXPIRING (SQ. FT.) EXPIRING LEASES EXPIRING LEASES EXPIRING LEASES
- --------------------- -------- --------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
1998................... 229 456,075 $ 7,014,972 $15.38 6.59%
1999................... 115 312,429 4,384,289 14.03 4.51
2000................... 117 402,520 5,146,389 12.79 5.82
2001................... 136 454,611 6,623,822 14.57 6.57
2002................... 100 590,326 5,760,471 9.76 8.53
2003................... 28 152,406 2,225,606 14.60 2.20
2004................... 35 421,006 3,716,899 8.83 6.08
2005................... 28 234,397 3,845,805 16.41 3.39
2006................... 26 217,215 3,210,897 14.78 3.14
2007................... 31 280,017 3,727,363 13.31 4.04
Thereafter............. 101 3,400,503 30,251,550 8.90 49.13
--- --------- ----------- ------
TOTAL................ 946 6,921,505 $75,908,063 $10.96 100.00%
=== ========= =========== ======
</TABLE>
DEBT SECURED BY PROPERTIES
The following table summarizes the outstanding indebtedness secured by the
Company's Properties as of December 31, 1997.
<TABLE>
<CAPTION>
OUTSTANDING INTEREST YEAR OF
BALANCE RATE MATURITY
-------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Notes Payable--Insurance Companies:
Covina Town Square......................... $ 17,960 9.60% 2004
Date Palm Center........................... 9,515 10.45 2002
Vons (Escondido)........................... 2,726 9.30 1999
Fire Mountain Center....................... 7,481 10.25 1999
Home Base (Glendora)....................... 6,110 9.50 1999
Gardena Gateway Center..................... 6,710 10.05 2002
Gresham Town Fair.......................... 9,762 7.50 1999
Westgate North............................. 5,955 8.30 2014
Note Payable--Pension Fund(1)................ 30,691 11.45 2006
Note Payable--Pension Fund(1)................ 9,884 10.90 2006
Note Payable--Financial Institution(2)....... 22,540 8.94 2005
Note Payable--Financial Institution(2)....... 33,474 9.00 2010
Tax Exempt Floating Rate Debt:
Baldwin Hills Crenshaw Plaza............... 30,000 5.30 2014
Kenneth Hahn Plaza......................... 6,000 5.20 2015
Secured line of credit(3).................... 108,727 6.63 2000
--------
TOTAL(4) .................................... $307,535 9.73%(5)
========
</TABLE>
- --------
(1) Represents two notes payable to a pension fund which are cross-
collateralized by the following properties; Kmart (Rocklin), Kmart (El
Centro), Kmart (Banning), Kmart (Los Banos), Kmart (Madera), Kmart
(Phoenix), Advantage/Sportmart Shopping Center, Huntington Center, Oracle
Road, Vons (Simi Valley), Lakewood Plaza, Sam's Club (Downey), and Parkway
Place.
12
<PAGE>
(2) This note is in two tranches which are cross-collateralized by the
following properties; San Fernando Mission Plaza, Rosedale Village,
Country Fair Shopping Center, Fullerton Town Center, La Verne Town Center,
and Sam's Club (Fountain Valley).
(3) As of December 31, 1997, the Company had a line of credit outstanding with
a financial institution (the "Credit Facility"), due December 2000. The
Credit Facility is secured by Empire Center, Medford Center, Montebello
Town Square, The City Center, Media City Center, Pacific Linen Plaza, Ross
Center, Vancouver Park Place, Smitty's Tucson, Frontier Village and
Marshall's Plaza. Subsequent to December 31, 1997, the Company has reduced
the balance outstanding on its Credit Facility by a net amount of
$7.1 million.
(4) Total debt does not include $6,125,000 of Community Facilities District
Special Tax Bonds (CFD) issued by the City of Fontana, California. Debt
service is provided through a special tax assessment on the parcels of
land within the Empire Center.
(5) Weighted average rate of interest on mortgage debt.
Aggregate future principal payments by year on the balance of mortgage
indebtedness as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
YEAR PAYMENTS
---- --------------
(IN THOUSANDS)
<S> <C>
1998........................................................ $ 2,866
1999........................................................ 28,186
2000........................................................ 2,898
2001........................................................ 3,234
2002........................................................ 18,643
2003........................................................ 3,692
2004........................................................ 20,652
2005........................................................ 24,876
2006........................................................ 23,922
2007........................................................ 968
Thereafter.................................................. 68,871
--------
Total $198,808
========
</TABLE>
Total amount excludes $108,727,000 outstanding on the secured line of credit
which is due on December 31, 2000.
DEVELOPMENT PROPERTIES
Certain properties had not completed their initial leasing plans at the date
of the Company's initial public offering; Media City Center, Baldwin Hills
Crenshaw Plaza, Empire Center, Montebello Town Square and The City Center (the
"Development Properties"). Pursuant to an agreement among the Operating
Partnership and certain limited partners that transferred the Development
Properties to the Operating Partnership such OP limited partners had the right
to receive additional partnership units in the Operating Partnership ("OP
Units") based upon the increase in net annualized cash flow from the
Development Properties between October 31, 1993 and the expiration of the
applicable lease-up period for each development property. The increase in net
annualized cash flow was based on leases signed by March 31 with the tenant
open and paying rent by June 30 of the respective lease-up periods.
The lease-up period for Montebello Town Square and The City Center expired
on March 31, 1995 and resulted in the issuance of an additional 113,506 OP
Units to the OP Limited Partners. In connection with this issuance of
additional OP Units, all of the leases were executed by March 31, 1995, with
tenants paying rent by June 30, 1995, including certain leases where tenants
were not open by June 30, 1995. The independent directors determined that it
was appropriate to issue additional OP Units for all of these leases.
13
<PAGE>
The lease-up period for Media City Center, Baldwin Hills Crenshaw Plaza and
Empire Center expired on March 31, 1996. In connection with the completion of
construction at Empire Center, certain improvements constructed during the
lease-up period were not leased as of March 31, 1996. The independent
directors determined that, the cost of construction of such improvements
should be borne by the Company for purposes of calculating the issuance of
additional OP Units for Empire Center and no OP Units would be issuable to the
limited partners in connection with such unleased improvements. During the
year ended December 31, 1995, the opening of approximately 38,000 square feet
of retail and restaurant space at Media City Center, principally comprising a
30,000 square foot Virgin Megastore, and the 57,000 square foot Sony/Magic
Johnson Theatres at Baldwin Hills Crenshaw Plaza, represented expansion of the
Development Properties not contemplated at the IPO. Therefore, no additional
OP Units were issued in connection with such expansions.
On August 12, 1996, the Independent members of the Board of Directors
approved the issuance of 3,242,379 OP Units to the limited partners. The
market capitalization of the OP was thereby increased by $41.7 million based
upon the stock price as of August 12, 1996. The minority interest in the OP
was thereby increased from 8% to approximately 26% effective July 1, 1996. As
a result of the issuance of the 3,242,379 OP Units, minority interest was
increased and additional paid-in capital decreased by approximately $31.5
million. The issuance of such additional OP Units in the third quarter of 1996
did not have a dilutive effect on net income per share.
PARTIALLY-OWNED PROPERTIES
The Operating Partnership owns partnership interests in the owners of the
two "Partially-Owned Properties." The Operating Partnership owns a 75%
managing general partnership interest in the partnership that owns Kenneth
Hahn Plaza and an 85% managing general partnership interest in Haagen-Central
Partnership, the general partnership which is the managing general partner of,
and holds a 40% interest in, the partnership that owns Vermont-Slauson
Shopping Center. Therefore, the Operating Partnership holds the equivalent of
a 34% interest in Vermont-Slauson Shopping Center.
The Operating Partnership is the managing general partner of each such
partnership, with control over day-to-day operations of the Partially-Owned
Properties. The Company may have certain fiduciary responsibilities to its
outside partners which it will need to consider when making decisions relating
to the Partially-Owned Properties. The consent of the Company's outside
partners may be required for any sale, transfer or encumbrance of the
Partially-Owned Properties. In addition, the sale, transfer, assignment or
pledge of partnership interests in the partnerships which own the Partially-
Owned Properties require the prior written consent of the other partners or
are subject to certain rights of first refusal.
OTHER ASSETS OF THE COMPANY
The Company's interest in Media City Center (Burbank, California) includes
an interest in two promissory notes issued by the Redevelopment Burbank Agency
of the City of Burbank (the "Burbank Agency") which mature on February 1,
2016. The first note is unsecured and was issued by the Burbank Agency on
November 15, 1989 with an $18.5 million principal amount and bears interest at
9.25% per annum. The note is nonrecourse to the Burbank Agency. On each semi-
annual payment date the Burbank Agency is required to make payments on the
note to the extent of 70% of the real property tax increment generated by
Media City Center, with certain exceptions. The second note is secured by
certain tax revenues and was issued by the Burbank Agency on December 6, 1990
with a $33 million initial principal amount and bears interest at 9.25% per
annum. The note is nonrecourse to the Burbank Agency but is secured by certain
real property tax increments generated by the property as well as certain
sales and use taxes generated by the property. On each semi-annual payment
date the Burbank Agency is required to make payments on the note only to the
extent of such tax items, less rent paid by Macy's (formerly Bullock's). Any
amount which accrues under the notes that is not required to be paid is added
to the principal amount of such notes. Any principal or interest due on either
of the notes which has not been paid (due to the permitted reductions and
limitation on payments described above) as of their respective maturity dates
will be forgiven, and it is not likely that the full face amount of the notes
and the interest thereon will be paid by such maturity dates. During the years
ended December 31, 1997, 1996 and 1995, the Company recognized income of
approximately $2,656,000, $2,797,000 and $2,756,000, respectively, pursuant to
the terms of such agency note agreements.
14
<PAGE>
Under similar commitments from the Community Redevelopment Agencies of the
Cities of Fullerton and Chino, other income was recognized for the years ended
December 31, 1997, 1996 and 1995 from Fullerton Town Center of $48,000,
$57,000, and $59,000 respectively, and Country Fair Shopping Center of
147,000, $146,000 and $122,000 respectively. Such commitments expire in 2013
and 2001 for Fullerton and Chino, respectively, and any balance owing to the
Company at expiration will be forgiven and discharged.
Such commitments have not been recorded as assets in the Company's financial
statements as they are contingent in nature.
ENVIRONMENTAL AND OTHER REGULATORY REQUIREMENTS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real property may become liable for the costs of removal
or remediation of certain hazardous or toxic substances on or in its
properties. Such laws may impose such liability without regard to whether the
Company knew of, or was responsible for, the presence of such hazardous or
toxic substances. The costs of investigation, removal, or remediation of such
substances may be substantial and the presence of such substances, or the
failure to properly remediate such substances, may adversely affect the
Owner's ability to sell such real estate or to borrow using such real estate
as collateral. In connection with its ownership and operation of properties,
the Company may be potentially liable under such laws and may incur costs in
responding to such liabilities. No assurance can be given that any existing
environmental studies with respect to any of the Properties reveal all
environmental liabilities, that any prior owner or tenant of a Property did
not create any material environmental condition not known to the Company, that
future laws, ordinances or regulations will not impose any material
environmental liability, or that a material environmental condition does not
otherwise exist as to any one or more Properties.
Pursuant to an Environmental Indemnity Agreement the transferors of the 36
properties acquired at the time of the Company's formation in December 1993
(the "Original Properties") have agreed to provide certain indemnities to the
Company for environmental liabilities that may arise with respect to any
contamination on or affecting the condition of the Original Properties which
was known as of December 27, 1993 or which becomes known after December 27,
1993 as a result of additional environmental testing commenced prior to
December 27, 1993. Pursuant to the transfer documents with respect to Rosedale
Village, Gresham Town Fair, Medford Center and LaVerne Towne Center (the "1994
Acquisition Properties"), the transferors of such properties provided certain
indemnities with respect to environmental liabilities to the Company. Because
responsibility for such matters is being retained by the transferors no
liabilities have been recorded in the financial statements of the Company with
respect to such matters. No environmental costs were incurred by the Company
during the years ended December 31, 1997, 1996 and 1995.
The Properties are subject to the Americans with Disabilities Act of 1990
(the "ADA"). The ADA has separate compliance requirements for "public
accommodations" and "commercial facilities" but generally requires that all
public facilities be made accessible to people with disabilities. These
requirements became effective in 1992. Although the Company believes that the
Properties are substantially in compliance with the present requirements of
the ADA, the Company may incur additional costs of complying with the ADA in
the future. However, the Company does not believe that such costs of
compliance will have a material effect on the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims that arise in
the ordinary course of business. These matters are generally covered by
insurance. While the resolution of these matters cannot be predicted with
certainty, management believes, based on currently available information, that
the final outcome of such matters will not have a material adverse effect on
the financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1997, no matters were submitted for a vote of
stockholders of the Company.
15
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the American Stock Exchange ("ASE")
under the symbol "ACH." At February 28, 1998, the Company had approximately
200 stockholders of record and approximately 6,000 beneficial owners. The
following table sets forth quarterly high and low closing sales prices of the
Common Stock reported on the ASE and the dividends paid by the Company with
respect to each period.
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
THREE MONTHS ENDED: HIGH LOW PER SHARE
------------------- ------- ------- ---------
<S> <C> <C> <C>
December 31, 1997.................................. $18.250 $15.500 $0.36
September 30, 1997................................. 16.875 15.250 0.36
June 30, 1997...................................... 16.250 13.000 0.36
March 31, 1997..................................... 16.000 13.750 0.36
December 31, 1996.................................. 15.000 13.750 0.36
September 30, 1996................................. 14.500 12.250 0.36
June 30, 1996...................................... 13.375 10.875 0.36
March 31, 1996..................................... 12.125 11.500 0.36
</TABLE>
Distributions included a return of capital component of approximately 72%,
76% and 60%, for the years ended December 31, 1997, 1996 and 1995,
respectively. All distributions will be made by the Company at the discretion
of the Board of Directors and will depend on the earnings of the Company, its
financial condition and such other factors as the Board of Directors deems
relevant. In order to qualify for the beneficial tax treatment accorded to
real estate investment trusts under the Internal Revenue Code, the Company is
required to make distributions to holders of its shares which will be at least
95% of the Company's "real estate investment trust taxable income," as defined
in Section 857 of the Code.
16
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company and
the Predecessor Affiliates on a historical basis. The following data should be
read in conjunction with management's discussion and analysis of financial
condition and results of operations and all of the financial statements and
notes thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------
1997 1996 1995 1994 1993
--------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND
NUMBER OF PROPERTIES)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Total operating revenues.... $ 88,961 $ 87,719 $ 81,323 $ 73,199 $ 54,795
--------- -------- -------- -------- --------
Expenses:
Interest.................. 36,083 35,516 32,304 27,952 33,373
Property operating costs.. 25,495 25,633 26,059 21,299 20,215
Depreciation and
amortization............. 18,333 17,118 20,018 18,695 14,143
Non-recurring items....... 9,355 6,638 -- -- 1,578
General and
administrative........... 5,166 5,064 5,334 3,260 2,047
--------- -------- -------- -------- --------
Total expenses.............. 94,432 89,969 83,715 71,206 71,356
--------- -------- -------- -------- --------
(Loss) income before other
items...................... (5,471) (2,250) (2,392) 1,993 (16,561)
Equity in income of
management company......... 19 -- 4 137 122
Minority interests.......... 1,229 245 (20) (460) (382)
Extraordinary items......... (422) -- -- -- (9,905)
--------- -------- -------- -------- --------
Net (loss) income........... $ (4,645) $ (2,005) $ (2,408) $ 1,670 $(26,726)
========= ======== ======== ======== ========
Net (loss) income per share,
basic...................... $ (0.35) $ (0.17) $ (0.20) $ 0.14
Dividends per share......... $ 1.44 $ 1.44 $ 1.44 $ 1.44
Weighted average shares of
common stock outstanding... 13,312 12,024 11,964 11,678
OTHER DATA:
Funds from Operations(1):
Basic..................... $ 21,924 $ 20,893 $ 17,075 $ 20,249
Diluted................... 35,793 34,765 30,943 34,230
Cash Flows From:
Operating Activities...... $ 22,685 $ 22,414 $ 19,910 $ 21,387 $ (2,311)
Investing Activities...... (113,318) (20,522) (32,075) (44,553) (75,707)
Financing Activities...... 88,305 362 11,326 19,978 92,476
Number of operating
Properties (at end of
period).................... 46 38 40 40 36
Gross Leasable Area owned
(sq. ft.)
(at end of period) ........ 7,217 6,570 6,740 6,450 5,448
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1997 1996 1995 1994 1993
--------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate before
accumulated depreciation... $ 783,279 $659,565 $653,058 $618,427 $553,414
Total assets................ 710,713 594,876 605,777 590,030 541,738
Total debt and other
liabilities................ 519,441 434,603 421,561 385,258 330,105
Minority interests.......... 41,433 43,647 16,765 18,433 18,549
Redeemable Common Stock..... 8,385 -- -- -- --
Stockholders' equity........ 141,454 116,626 167,451 186,339 193,084
</TABLE>
- --------
(1) The Company computes funds from operations ("FFO") on both a basic and a
diluted basis and considers Operating Partnership Units as the equivalent
of shares for the purpose of these computations. The diluted basis assumes
the conversion of the convertible and exchangeable debentures into shares
of common stock as well as other common stock equivalents. For further
discussion of FFO, see Item 7--Management's Discussion and Analysis of
Results of Operations.
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the "Selected
Financial Data" and the Company's Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Form 10-K.
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 1997 to the year ended December 31,
1996.
Operating revenues increased by $1.3 million to $89.0 million for the year
ended December 31, 1997 from $87.7 million for the year ended December 31,
1996. The increase was primarily a result of higher occupancy levels at Media
City Center and Baldwin Hills Crenshaw Plaza and the acquisition of eight
properties during the third and fourth quarters of 1997. These increases were
partially offset by the loss of revenue at the former Sears store at Covina
Town Square and the loss of revenue resulting from the closure of the IKEA
Store at Empire Center.
Interest expense increased by $0.6 million from $35.5 million for the year
ended December 31, 1996 to $36.1 million for the year ended December 31, 1997.
The increase is principally a function of borrowings on the Company's line of
credit to finance its recent acquisitions.
Property operating costs were consistent from December 31, 1997 to 1996
decreasing from $25.6 million to $25.5 million.
Depreciation and amortization expense increased by $1.2 million from $17.1
million for the year ended December 31, 1996 to $18.3 million for the year
ended December 31, 1997. This increase was a result of an overall increase in
investment in rental properties.
During the fourth quarter of 1997, the Company recorded a $9.4 million non-
recurring charge related to the Separation Agreement. This consists of $2.7
million in cash payment made in January 1998, vesting of outstanding stock
options and restricted stock grants, granting and vesting of previously
committed restricted stock awards and the value attributed to the Company's
agreement to repurchase, or cause to have repurchased, substantially all of
the Haagen Family's ownership in the Company at a minimum price of $17 per
share.
During 1996 the Company recorded a non-recurring non-cash charge of $6.9
million to increase the reserve against the receivable for straight-line
rents. Also in 1996 the Company recorded a non-cash charge of $2.1 million
related to the write-off of the net book value of a building which was
demolished.
18
<PAGE>
During 1996, the Company sold two single tenant facilities for a net gain on
sale of $2.4 million.
During 1997, the Company incurred an extraordinary loss on the early
extinguishment of debt of $422,000 related to the write-off of unamortized
deferred financing costs.
Income before other items decreased by $0.5 million from $4.4 million for
the year ended December 31, 1996 to $3.9 million for the year ended December
31, 1997 for the reasons stated above.
Comparison of the year ended December 31, 1996, to the year ended December
31, 1995.
Operating revenues increased by $6.4 million to $87.7 million for the year
ended December 31, 1996 from $81.3 million for the year ended December 31,
1995. The increase was primarily a result of the lease-up of the Development
Properties, comprising Media City Center, Empire Center and Baldwin Hills
Crenshaw Plaza. However, improvements in the economic performance of the
properties were mitigated by the Company recording reserves to offset the
straight-lining of contractual rent increases. No Straight-line rental revenue
was recognized in the year ended December 31, 1996, compared to approximately
$1.3 million in the year ended December 31, 1995.
Interest expense increased by $3.2 million from $32.3 million for the year
ended December 31, 1995 to $35.5 million for the year ended December 31, 1996.
The increase is principally a function of borrowings on the Company's line of
credit to finance construction and redevelopment activity at various
properties.
Property operating costs decreased by $.5 million to $25.6 million for the
year ended December 31, 1996 from $26.1 million for the year ended December
31, 1995. The decrease is a result of several factors including additional bad
debt expense recorded in 1995 at certain of the properties.
Depreciation and amortization expense decreased by $2.9 million from $20.0
million for the year ended December 31, 1995 to $17.1 million for the year
ended December 31, 1996. Depreciation decreased by $4.8 million as a result of
a change in the depreciable lives of the properties. The Company concluded
that in order to more appropriately align the depreciable lives with the
economic lives of the properties the lives should generally be increased to 40
years from previously utilized lives ranging from 20 to 31.5 years. This
decrease was offset by a $1.9 million increase as a result of an overall
increase in investment in rental properties.
General and administrative expenses declined by $0.2 million from $5.3
million for the year ended December 31, 1995 to $5.1 million for the year
ended December 31, 1996 principally as a result of the write-off in the first
quarter of 1995 of costs related to a potential secondary offering.
During 1996, the Company sold two single tenant facilities for $6.3 million
in cash, resulting in a net gain on sale of $2.4 million.
During the first quarter of 1996, the Company reassessed the recoverability
of straight-line contractual rent increases as a result of the continuing
mergers and consolidations within the retail industry and the financial
difficulties of certain retailers. Accordingly, the Company recorded a non-
recurring non-cash charge of $6.9 million to increase the reserve against the
receivable for straight-line rents. Additionally, the Company has fully
reserved against unbilled deferred rents in 1996. The company believes this to
be an appropriate and conservative approach to account for the straight-lining
of contractual rent increases in the current retail environment. The impact of
this change was a reduction in revenues recognized in 1996 of approximately
$1.3 million.
On October 31, 1996, the Sears store in the Covina Town Square power center
(Covina, California) vacated its premises. Annual rental revenues received
from Sears were $851,000. The Company has signed a lease with AMC Theatres for
a 30 screen multiplex theater on the former Sears site; however, through the
completion of the theater (in February, 1998) the impact from the loss of the
Sears revenues was approximately $0.015 per share on a quarterly basis. In
connection with signing the lease with AMC Theatres, the Company recorded a
non-recurring non-cash charge of $2.1 million to write-off the net book value
of the demolished Sears building. Covina Town Square is a 422,000 square foot
power center; other tenants include Home Depot, Petsmart and Staples.
19
<PAGE>
The non-recurring items detailed in the above three paragraphs aggregate to
a net charge of $6.6 million.
Loss from operations before minority interests decreased by $0.1 million
from a loss of $2.4 million for the year ended December 31, 1995 to a loss of
$2.3 million for the year ended December 31, 1996 for the reasons stated
above.
Selected Property Financial Information
Net Operating Income (defined as operating revenues less property operating
costs) for the Company's properties was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Stabilized Properties:
Regional Malls..................................... $17,698 $16,997 $11,830
Power Centers...................................... 15,974 16,345 15,319
Community Centers.................................. 17,971 16,867 17,316
Single Tenants..................................... 7,903 7,856 6,914
Redevelopment Properties:
Medford Center..................................... 1,140 989 975
Covina Town Square................................. 2,438 2,764 2,587
Other Income......................................... 342 268 323
------- ------- -------
Net Operating Income................................. $63,466 $62,086 $55,264
======= ======= =======
</TABLE>
The following summarizes the percentage of leased GLA (excluding non-owned
GLA and GLA leased but not yet constructed) as of:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Stabilized Properties:
Regional Malls................................... 91.3% 92.5%
Power Centers.................................... 90.8 95.4
Community Centers................................ 95.7 95.9
Single Tenants................................... 100.0 100.0
Redevelopment Properties:
Covina Town Square............................... 88.7 88.3
Medford Center................................... 98.3 97.0
Aggregate Portfolio................................ 94.6 95.8
</TABLE>
During 1997 the Company signed leases for approximately 374,000 square feet,
including 116,000 square feet at its Redevelopment Properties. Such signed
leases resulted in an increase in the overall rent per square foot of the
Company's portfolio to $10.97 per square foot at December 31, 1997 from $10.61
per square foot at December 31, 1996.
In the first quarter of 1997 the non-owned IKEA store and several other
tenants at Empire Center (Fontana, California) vacated their premises. The
leased space at Empire Center decreased to 61.7% at December 31, 1997. Leased
space at the Company's aggregate portfolio decreased to 94.6% from 95.8% at
December 31, 1997.
FUNDS FROM OPERATIONS
The Company considers Funds From Operations ("FFO") to be an alternative
measure of the performance of an equity REIT since such measure does not
recognize depreciation and amortization expenses as operating expenses. FFO
was originally defined by the National Association of Real Estate Investment
Trusts
20
<PAGE>
("NAREIT") as net income plus depreciation and amortization, less gains on
sales of properties. In a March 1995 white paper, NAREIT adopted a revised
definition of FFO. The principal change is that the revised definition does
not permit depreciation or amortization of non-real estate assets to be added
back in computing FFO. The Company historically added back amortization of
deferred financing costs in computing FFO. Additionally, the revised
definition also permits FFO to be adjusted for significant non-recurring
items.
The Company adopted the revised definition of FFO commencing January 1,
1996. The Company has restated its FFO for comparable periods as if the new
definition had been adopted at that date. Management concurs with NAREIT in
believing that reductions for the depreciation and amortization of real estate
and its related costs are not meaningful in evaluating income-producing real
estate.
The Company computes FFO on both a basic and a diluted basis. The diluted
basis assumes the conversion of the convertible and exchangeable debentures
into shares of common stock as well as other common stock equivalents. The
following table summarizes the Company's computation of FFO and provides
certain additional disclosures (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Net Loss.......................................... $ (4,645) $(2,005) $(2,408)
Adjustments to reconcile net loss to funds from
operations:
Depreciation and Amortization:
Buildings and improvements...................... 12,161 11,615 17,046
Tenant improvements and allowances.............. 4,635 4,284 2,310
Leasing costs................................... 1,451 1,163 662
Non-recurring charges, net........................ 9,355 6,638 --
Minority Interests................................ (1,810) (802) (535)
Extraordinary Loss on Early Extinguishment of
Debt............................................. 422 -- --
Other............................................. 355 -- --
-------- ------- -------
Funds from Operations, basic...................... 21,924 20,893 17,075
Debenture interest expense........................ 12,569 12,573 12,570
Amortization of debenture financing costs......... 1,300 1,299 1,298
-------- ------- -------
Funds from Operations, diluted $ 35,793 $34,765 $30,943
======== ======= =======
SUPPLEMENTAL DISCLOSURES
Expansion of Portfolio:
Acquisitions.................................... $ 91,382 $ -- $ --
Construction and Development.................... 31,749 13,315 34,116
Leasing......................................... 2,096 2,106 2,822
-------- ------- -------
$125,227 $15,421 $36,938
======== ======= =======
Releasing and Maintenance of Portfolio:
Construction and Development.................... $ 583 $ 635 $ 515
Leasing......................................... 107 417 284
-------- ------- -------
$ 690 $ 1,052 $ 799
======== ======= =======
Straight-line rental income....................... $ -- $ -- $ 1,266
======== ======= =======
</TABLE>
The Company considers any space that was vacant or unbuilt at the date of
its initial public offering to be expansion of its portfolio.
Funds from operations, on a basic basis, increased to $21.9 million for the
year ended December 31, 1997, as compared to $20.9 million for the same period
in 1996. On a diluted basis, assuming conversion of the debentures and other
common stock equivalents, funds from operations increased to $35.8 million
from $34.8 million. The increase in funds from operations is principally a
function of acquisitions and increases in
21
<PAGE>
cash flow at Media City Center and Baldwin Hills Crenshaw Plaza. However,
improvements in the economic performance of the properties were mitigated by
the closure of the IKEA store at Empire Center and the loss of revenue from
the former Sears store at Covina Town Square. During 1997 and 1996, the
Company recorded non-recurring charges of $9.4 million and $6.6 million,
respectively. The 1997 charge related to the retirement of the Haagen Family
while the 1996 charge resulted from an increase to the reserve against the
receivable for straight-line rents, a $2.1 million charge to write-off the net
book value of a building to be demolished, and a net gain on sale of
properties of $2.4 million. Such non-recurring items were not included in the
computation of FFO as the Company considers them to be significant non-
recurring events that if deducted would materially distort the comparative
measurement of Company performance.
Funds from operations do not represent cash flows from operations as defined
by Generally Accepted Accounting Principles and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity. Further, the
methodology for computing FFO utilized by the Company may differ from that
utilized by other equity REITs and, accordingly may not be comparable to such
other REITs.
CASH FLOWS
Net cash provided by operations for the year ended December 31, 1997 was
$22.7 million compared to $22.4 million for the prior year. The principal
reasons for the increase in net cash from operations are discussed in Results
of Operations above.
Net cash used by investing activities increased by $92.8 million to $113.3
million from $20.5 million for the prior year. The increase is a direct result
of the acquisitions made during 1997 of $91.4 million. Net cash provided by
financing activities was $88.3 million for the year ended December 31, 1997,
an increase of $87.9 million from the prior year. This increase includes $58.7
million in proceeds from the sale of common stock to LFREI. In addition, the
Company drew an additional $44 million against its secured line of Credit.
These increases were offset by increased restricted cash requirements, the
costs of obtaining both equity and debt financing and an increase in dividends
and distributions as a result of the issuance of common stock and OP units.
Net cash provided by operations was $22.4 million for the year ended
December 31, 1996, compared to $19.9 million for the year ended December 31,
1995. The principal reasons for the increase in net cash from operations are
discussed in Results of Operations above.
Net cash used by investment activities decreased to $20.5 million for the
year ended December 31, 1996 from $32.1 million for the year ended December
31, 1995. This reflects a decrease in the level of construction and
development activity of $10.3 million, $5.0 million paid in settlement of
certain other liabilities and net proceeds from the sale of two rental
properties of $6.3 million. Net cash provided by financing activities was $0.4
million for the year ended December 31, 1996, a decrease of $10.9 million from
the prior year. This decrease includes $2.6 million in principal re-payments
in connection with the sale of rental property, a decrease in cash generated
from restricted cash of $1.8 million, and a net $6.5 million decrease in net
additional borrowings.
LIQUIDITY SOURCES AND REQUIREMENTS
In December 1997, the Operating Partnership entered into a new revolving
line of credit with a maximum borrowing limit of $250 million (the "Credit
Facility"). The Credit Facility will now primarily provide continued funding
for the Company's planned acquisition and redevelopment activities. The Credit
Facility expires in December 2000. Borrowings under the Credit Facility are
secured by first mortgage liens on Montebello Town Square, The City Center,
Media City Center, Empire Center, Medford Center, Pacific Linen Plaza, Ross
Center, Vancouver Park Place, Smitty's Tucson, Frontier Village and Marshalls
Plaza. At February 28, 1998, outstanding borrowings on the Credit Facility
were approximately $101.7 million, with an additional $4.2 million having been
utilized to provide letters of credit.
22
<PAGE>
To the extent that borrowings under the Credit Facility are less than the
outstanding commitment from LFREI the interest rate will be London Inter-Bank
Offering Rate ("LIBOR") plus 100 basis points. To the extent the borrowings
are in excess of the outstanding LFREI commitment such excess will bear
interest at LIBOR plus 137.5 basis points.
Upon conversion to an unsecured facility, borrowings will bear interest at
varying rates based upon the company's leverage ratio and investment grade
rating interest. The range of rates is from 75 to 137.5 basis points over
LIBOR.
On June 1, 1997 the Company entered into a Stock Purchase Agreement with LF
Strategic Realty Investors, L.P. and Prometheus Western Retail, LLC,
affiliates of Lazard Freres Real Estate Investors, LLC, (together "LFREI"),
providing for LFREI to invest a total of up to $235 million in Common Stock of
the Company (the "Transaction"). Pursuant to the Stock Purchase Agreement the
Company will sell an aggregate of 15,666,666 shares of Common Stock to LFREI
at a price of $15.00 per share, for an aggregate purchase price of $235
million (the "Total Equity Commitment"). The purchase price per share was
determined as a result of arm's length negotiations between the Company and
its advisors and LFREI and its advisors.
As of December 31, 1997, the Company had sold 4,006,434 shares, to LFREI
under the terms of the Transaction for aggregate proceeds of $60.1 million. On
February 13, 1998 the Company sold an additional 2,700,000 shares to LFREI for
proceeds of $40.5 million, reducing the Remaining Equity Commitment to
$134.4 million.
Loans maturing of $28.2 million in 1999 and $18.7 million in 2002, as well
as significant amounts due from 2004 to 2015, may require refinancing.
Additionally, the Company's secured line of credit is due in 2000 and the
convertible debentures of $138.6 million and exchangeable debentures of $30.0
million are due in 2001 and 2003, respectively. See "Item 2--Properties." The
Company believes, based on the collateral available within the Properties and
improvements in cash flow at the Redevelopment Properties, that it will be
able to effect such refinancings for the foreseeable future.
The Company anticipates continuing to execute its acquisition and
redevelopment strategy during the next 12 months. The Company believes that
such acquisitions will be funded from the LFREI Equity Commitment, the
Company's Credit Facility, future debt refinancings and financings, and the
issuance of equity.
INFLATION
The Company's long-term leases contain provisions designed to mitigate the
adverse impact of inflation on its results from operations. Such provisions
include clauses enabling the Company to receive percentage rents based upon
tenants' gross sales, which generally increase as prices rise, and/or, in
certain cases, escalation clauses, which generally increase rental rates
during the terms of the leases. Such escalation clauses are often related to
increases in the CPI or similar inflation indices. In addition, many of the
Company's leases are for terms of less than ten years, which permits the
Company to seek to increase rents upon re-rental at market rates if rents are
below then existing market rates. Many of the Company's leases require the
tenants to pay a pro rata share of operating expenses, including common area
maintenance, real estate taxes, insurance and utilities, thereby reducing the
Company's exposure to increases in costs and operating expenses resulting from
inflation.
ADOPTION OF ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information. This statement is effective for financial
statements issued for fiscal years beginning after December 15, 1997. The
Company has not yet analyzed the impact of adopting this statement.
23
<PAGE>
YEAR 2000 COMPLIANCE
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process information containing a 2
digit year is commonly referred to as the Year 2000 Compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process certain
date-based information.
As the Company principally relies on third party vendors for its
applications, the Company has communicated with others with whom it does
significant business to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third party Year 2000 issues.
The Company has received statements of compliance from its primary third party
vendors which state that their systems will be in compliance by 1999. However,
there can be no guarantee that the systems of other companies on which the
Company's systems rely will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with the Company's
systems, would not have a material adverse effect on the Company.
The total cost to the Company of these Year 2000 Compliance activities has
not been and is not anticipated to be material to its financial position or
results of operations in any given year. These costs and the date on which the
Company plans to complete the Year 2000 modifications and testing processes
are based on management's best estimates, which were derived utilizing
numerous assumptions of future events including the continued availability of
certain resources, third party modification plans and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ from those plans.
FACTORS AFFECTING FUTURE RESULTS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements that are subject to
risk and uncertainty. Investors and potential investors in the Company's
securities are cautioned that a number of factors could adversely affect the
Company's ability to obtain these results, including (a) the inability to
lease currently vacant space in the Companies properties; (b) the inability of
tenants to pay contractual rent and other expenses; (c) bankruptcies of
tenants; (d) decisions by tenants, and anchor retailers which own their own
space, to close stores at the Company's properties; (e) increases in certain
operating costs at the Company's properties; (f) decreases in rental rates
available from tenants leasing space at the Company's properties; (g)
unavailability of financing for acquisition, development and redevelopment of
properties by the Company; (h) increases in interest rates; and (i) a general
economic downturn resulting in lower retail sales and, in turn, store
closures, rent delinquencies, reduced percentage rents and other downward
pressure on occupancies and rents at retail properties.
24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Alexander Haagen Properties, Inc.:
We have audited the accompanying consolidated balance sheets of Alexander
Haagen Properties, Inc. and subsidiaries (the "Company") as of December 31,
1997 and 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. Our audits also included the financial statement
schedules listed in the Index at Item 14.A.2. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December
31, 1997 and 1996, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
Deloitte & Touche LLP
Los Angeles, California
February 20, 1998
25
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Rental properties (Notes 2, 3, 5 and 6).................. $ 783,279 $ 659,565
Accumulated depreciation and amortization.............. (121,202) (104,330)
--------- ---------
Rental properties, net................................... 662,077 555,235
Cash and cash equivalents................................ 3,613 5,941
Tenant receivables, net (Note 2)......................... 6,017 5,987
Other receivables (Note 2)............................... 4,449 3,650
Receivable from management company (Note 12)............. -- 1,055
Investment in management company (Note 12)............... -- 621
Restricted cash (Note 5)................................. 9,435 3,252
Note Receivable from Officer (Note 4).................... 3,126 --
Deferred charges, net (Note 2)........................... 19,759 18,365
Other assets............................................. 2,237 770
--------- ---------
TOTAL................................................ $ 710,713 $ 594,876
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Secured Debt (Notes 5 and 11).......................... $ 313,660 $ 242,641
7 1/2% Convertible subordinated debentures (Notes 6 and
11)................................................... 138,599 138,599
7 1/4% Exchangeable subordinated debentures (Notes 6
and 11)............................................... 30,000 30,000
Accrued construction costs............................. 10,996 1,207
Accounts payable and other accrued expenses (Note 12).. 8,482 5,340
Accrued dividends and distributions (Note 8)........... 7,371 7,039
Accrued interest....................................... 5,604 5,490
Tenant security and other deposits..................... 4,729 4,287
--------- ---------
Total liabilities.................................... 519,441 434,603
--------- ---------
MINORITY INTERESTS (Notes 1, 2 and 13):
Operating Partnership.................................. 39,685 41,640
Other minorities....................................... 1,748 2,007
--------- ---------
Total minority interests............................. 41,433 43,647
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 13)
REDEEMABLE COMMON STOCK (Note 7):
510,034 shares outstanding as of December 31, 1997,
redeemable on May 25, 1999............................ 8,385 --
--------- ---------
STOCKHOLDERS' EQUITY (Notes 6, 8, and 9):
Common stock ($.01 par value, 50,000,000 shares
authorized; 15,664,814 and 12,024,378 shares issued
and outstanding at December 31, 1997 and 1996,
respectively)......................................... 157 120
Additional paid-in capital............................. 223,972 174,792
Accumulated distributions and deficit.................. (82,675) (58,286)
--------- ---------
Total stockholders' equity........................... 141,454 116,626
--------- ---------
TOTAL................................................ $ 710,713 $ 594,876
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
26
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
REVENUES (Note 2):
Rental revenues................................... $64,682 $62,538 $58,501
Expense Reimbursements............................ 19,204 19,902 18,339
Percentage rents.................................. 982 771 480
Other income...................................... 4,093 4,508 4,003
------- ------- -------
Total revenues................................ 88,961 87,719 81,323
------- ------- -------
EXPENSES:
Interest (Notes 2, 5 and 12)...................... 36,083 35,516 32,304
Property operating costs:
Common area..................................... 13,925 13,587 13,885
Property taxes.................................. 7,663 7,488 7,866
Leasehold rentals (Note 13)..................... 1,634 1,624 1,617
Marketing....................................... 529 1,121 1,073
Other operating................................. 1,744 1,813 1,618
Depreciation and amortization..................... 18,333 17,118 20,018
Non-recurring charges (Notes 1 and 12)............ 9,355 9,044 --
General and administrative (Note 12).............. 5,166 5,064 5,334
------- ------- -------
Total expenses................................ 94,432 92,375 83,715
------- ------- -------
LOSS FROM OPERATIONS BEFORE OTHER ITEMS............. (5,471) (4,656) (2,392)
NET GAIN ON SALE OF RENTAL PROPERTIES............... -- 2,406 --
EQUITY IN INCOME OF MANAGEMENT COMPANY (Note 10).... 19 -- 4
MINORITY INTERESTS (Note 2):
Operating Partnership............................. 1,508 526 209
Other minorities.................................. (279) (281) (229)
------- ------- -------
NET LOSS BEFORE EXTRAORDINARY ITEM.................. (4,223) (2,005) (2,408)
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT
(Note 5)........................................... (422) -- --
------- ------- -------
NET LOSS............................................ $(4,645) $(2,005) $(2,408)
======= ======= =======
BASIC LOSS PER SHARE (Note 2):
NET LOSS BEFORE EXTRAORDINARY ITEM................ $ (0.32) $ (0.17) $ (0.20)
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF
DEBT............................................. (0.03) -- --
------- ------- -------
NET LOSS ......................................... $ (0.35) $ (0.17) $ (0.20)
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
27
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL ACCUMULATED TOTAL
NUMBER OF PAID-IN DISTRIBUTIONS STOCKHOLDERS'
SHARES AMOUNT CAPITAL AND DEFICIT EQUITY
---------- ------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
JANUARY 1, 1995......... 11,877,824 $119 $205,528 $(19,308) $186,339
Conversions of
Convertible Debentures
into Common Stock (Note
6)..................... 55,555 968 968
Conversions of OP Units
into Common Stock and
effect of issuing OP
Units (Note 2)......... 90,663 1 (199) (198)
Net loss................ (2,408) (2,408)
Dividends declared (Note
8)..................... (17,250) (17,250)
---------- ---- -------- -------- --------
DECEMBER 31, 1995....... 12,024,042 120 206,297 (38,966) 167,451
Adjustment in connection
with issuance of OP
Units (Note 12)........ (31,509) (31,509)
Exercise of stock
options................ 336 4 4
Net Loss................ (2,005) (2,005)
Dividends declared (Note
8)..................... (17,315) (17,315)
---------- ---- -------- -------- --------
DECEMBER 31, 1996....... 12,024,378 120 174,792 (58,286) 116,626
Issuance of Common Stock
(Note 1)............... 4,006,434 40 58,242 58,282
Exercise of Stock
Options (Note 9)....... 36,369 1 441 442
Reclassification to
Redeemable Common
Stock (Note 7)......... (510,034) (5) (8,380) (8,385)
Restricted Stock Grants
(Notes 9 and 12)....... 101,000 1 65 66
Adjustment in connection
with Haagen Separation
(Note 12).............. 4,549 4,549
Conversion of OP Units
into Common Stock
and adjustment to
Minority Interest in OP
(Note 2)............... 6,667 (5,737) (5,737)
Net Loss................ (4,645) (4,645)
Dividends declared (Note
8)..................... (19,744) (19,744)
---------- ---- -------- -------- --------
DECEMBER 31, 1997....... 15,664,814 $157 $223,972 $(82,675) $141,454
========== ==== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
28
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................... $ (4,645) $ (2,005) $ (2,408)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization of rental
properties................................... 18,333 17,118 20,018
Amortization of deferred financing costs...... 2,074 2,058 1,861
Loss on early extinguishment of debt.......... 422 -- --
Non-recurring charge--Haagen Separation....... 9,355 -- --
Non-recurring provision for unbilled deferred
rent......................................... -- 6,900 --
Non-recurring charge for building demolition.. 57 2,144 --
Net gain on sale of rental properties......... -- (2,406) --
Equity in income of management company........ (19) -- (4)
Minority interests in operations.............. (1,229) (245) 20
Net changes in operating assets and
liabilities.................................. (1,663) (1,150) 423
--------- -------- --------
Net cash provided by operating activities... 22,685 22,414 19,910
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of properties..................... (85,420) -- --
Construction and development costs............ (24,772) (21,795) (32,075)
Note Receivable from Officer.................. (3,126) -- --
Payment of other liabilities.................. -- (5,000) --
Proceeds from sale of rental properties....... -- 6,273 --
--------- -------- --------
Net cash used in investing activities....... (113,318) (20,522) (32,075)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds received from mortgage financing..... -- -- 56,900
Principal payments on mortgage financing...... (2,464) (4,883) (1,922)
Borrowings on secured line of credit.......... 195,522 28,000 22,500
Repayments of secured line of credit.......... (127,995) (4,000) (47,445)
Proceeds from issuance of common stock........ 58,664 -- --
Costs of obtaining financing.................. (3,118) (284) (2,343)
(Increase) decrease in restricted cash........ (6,183) 933 2,710
Dividends to shareholders..................... (18,243) (17,315) (17,197)
Distributions to minority interests........... (7,878) (1,965) (1,877)
Other......................................... -- (124) --
--------- -------- --------
Net cash provided by financing activities... 88,305 362 11,326
--------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS.................................... (2,328) 2,254 (839)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR. 5,941 3,687 4,526
--------- -------- --------
CASH AND CASH EQUIVALENTS, AT END OF YEAR....... $ 3,613 $ 5,941 $ 3,687
========= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
29
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1997
1. BUSINESS
Alexander Haagen Properties, Inc., a Maryland corporation (the "Company"),
is a self-administered and self-managed real estate investment trust ("REIT").
The Company engages in the ownership, management, leasing, acquisition,
development and redevelopment of retail shopping centers in the Western United
States.
As of December 31, 1997, the Company owned a portfolio comprised of
interests in 46 retail shopping centers (the "Properties"). All of the
Properties and assets in the Company's portfolio are held and operated by
Alexander Haagen Properties Operating Partnership, L.P., a California limited
partnership (the "Operating Partnership" or "OP") and Alexander Haagen
Properties Finance Partnership, L.P. (the "Finance Partnership"). The Company
is the sole general partner of the Operating Partnership and owns a 79.1%
interest therein. The Company owns 100% of the Finance Partnership and is its
sole general partner while the Operating Partnership is its sole Limited
Partner. The Company conducts substantially all of its operations through the
Operating Partnership and generally has full, exclusive and complete
responsibility and discretion in the management and control of the Operating
Partnership. The Properties consist of regional malls, power/promotional
centers, neighborhood/community shopping centers and single tenant facilities.
On June 1, 1997 the Company entered into a Stock Purchase Agreement with LF
Strategic Realty Investors, L.P. and Prometheus Western Retail, LLC,
affiliates of Lazard Freres Real Estate Investors, LLC, (together "LFREI"),
providing for LFREI to invest a total of up to $235 million in Common Stock of
the Company (the "Transaction"). Pursuant to the Stock Purchase Agreement the
Company will sell an aggregate of 15,666,666 shares of Common Stock to LFREI
at a price of $15.00 per share, for an aggregate purchase price of
$235 million (the "Total Equity Commitment"). The purchase price per share was
determined as a result of arm's length negotiations between the Company and
its advisors and LFREI and its advisors. On August 14, 1997, the Stockholders
of the Company approved the Transaction.
As of December 31, 1997, the Company had sold 4,006,434 shares, to LFREI
under the terms of the Transaction for aggregate proceeds of $60.1 million. On
February 13, 1998 the Company sold an additional 2,700,000 shares to LFREI. As
of February 13, 1998, LFREI is obligated to purchase a further 8,960,232
Shares of Common Stock for aggregate proceeds of $134.4 million (the
"Remaining Equity Commitment"). As of such date, LFREI owned approximately
35.4% of the outstanding Common Stock.
The Company must sell the Remaining Equity Commitment not later than
February 14, 1999. If the Company has not drawn the Remaining Equity
Commitment by such date, LFREI will have the right on such date to purchase
such shares from the Company, at a price of $15.00 per share. If LFREI
acquires all of the shares represented by the Remaining Equity Commitment (and
assuming no other change in the number of outstanding shares), LFREI will own
approximately 56.3% of the outstanding Common Stock (37.9% on a Diluted
Basis).
Subject to certain restrictions, in the event that the Company issues or
sells shares of capital stock for cash, LFREI will be entitled to purchase or
subscribe for, either as part of such issuance or in a concurrent issuance,
that portion of the total number of shares to be issued equal to LFREI's
proportionate holdings of Common Stock prior to such issuance (but not to
exceed 37.5% of the offering).
For a period of five years following stockholder approval (the "Standstill
Period") and any Standstill Extension Term, LFREI and its affiliates may not
(i) acquire beneficial ownership of more than 49.9% of the outstanding shares
of Common Stock, on an Adjusted Fully Diluted Basis (as defined below), (ii)
sell, transfer or otherwise dispose of any shares of Common Stock except in
accordance with certain specified limitations (including a requirement that
the Company, in its sole and absolute discretion, approve any transfer in a
30
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
negotiated transaction that would result in the transferee beneficially owning
more than 9.8% of the Company's capital stock). As used herein, the term
Adjusted Fully Diluted Basis shall mean on a Diluted Basis, except that shares
of Common Stock issuable upon conversion of the Company's outstanding
convertible debt or upon exercise of options granted under management benefit
plans shall not be included. After giving effect to the sale of 15,666,666
shares to LFREI, and assuming no other change in the number of outstanding
shares, LFREI will own 49.0% of the Common Stock on an Adjusted Fully Diluted
Basis. In the event that the number of outstanding shares were to increase for
any reason (including as a result of issuance of Common Stock upon conversion
or exercise of the outstanding convertible debt or management stock options),
then LFREI would be allowed to acquire additional shares of Common Stock, up
to 49.9% on an Adjusted Fully Diluted Basis. In addition to the above, LFREI
has the right to nominate four members to the Company's Board of Directors.
Further, LFREI is entitled to receive access to certain operating statements
and other financial reports used in operating the Company on a monthly basis.
2. SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are as follows:
Basis of Presentation--The accompanying financial statements, include the
accounts of the Company and the OP on a consolidated basis. All significant
intercompany transactions and balances have been eliminated in the
consolidated presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Minority Interests--Included in minority interest for the years ended
December 31, 1997, 1996 and 1995 is the 20.9%, 26.3%, and 8.0% interests,
respectively, in the results of the OP which are owned by various third
parties. At December 31, 1997, 1996 and 1995, 4,279,789, 4,286,456, and
1,069,576 OP Units were held by the minority limited partners, respectively.
The OP Units are exchangeable, subject to maintaining the Company's status as
a REIT, on a one-for-one basis for shares of the Company's common stock or for
cash, at the option of the Company.
In addition, adjustments have been made to minority interest in the OP.
During 1997, 1996 and 1995, adjustments of $5,737,000, $31,509,000 and
$199,000 were recorded, principally, as a result of the issuance of additional
shares of common stock and OP Units and the conversion of OP Units into common
stock.
Minority interest also includes the limited partners' share of equity in two
properties. The two properties in which the OP has a general partner interest
are Kenneth Hahn Plaza (75% interest) and Vermont-Slauson Shopping Center (34%
interest). Consolidation accounting is applied to both of the above
partnerships as the OP is deemed to have control over the operations of the
properties.
Rental Properties--Rental properties are stated at cost less accumulated
depreciation. Costs incurred for the acquisition, renovation and betterment of
the properties are capitalized. Maintenance and repairs are charged to income
as incurred. Costs incurred during the initial leasing period of a property
(primarily representing interest, property taxes, and unrecoverable operating
costs) are also capitalized as buildings and improvements. The initial leasing
period is generally defined as that period beginning when basic construction
of the building is complete and ending when substantially all tenant
improvements and additional construction costs have been incurred; however,
such initial leasing period cannot exceed one year.
31
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company regularly reviews long-lived assets and intangible assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. If the sum of expected
future cash flow is less than the carrying amount of the asset, the Company
recognizes an impairment loss equal to the difference between the estimated
current value and the carrying amount of the asset.
Interest costs incurred with respect to qualified expenditures relating to
the construction of assets are capitalized during the construction period.
Interest capitalized during the years ended December 31, 1997, 1996 and 1995
amounted to $843,000, $400,000 and $1,112,000, respectively. Cash paid for
interest, net of capitalized interest costs, was $33,895,000, $33,576,000 and
$29,116,000, for the years ended December 31, 1997, 1996 and 1995,
respectively.
Depreciation and Amortization--The cost of buildings and improvements is
depreciated on the straight-line method over estimated useful lives, as
follows:
Buildings--40 years
Leasehold interests--shorter of lease term or useful life of the
related property
Improvements--shorter of lease term or useful life ranging from 10 to
20 years
During the first quarter of 1996, the Company reviewed the depreciable lives
of its properties. The Company concluded that in order to more appropriately
align the depreciable lives with the economic lives of the properties the
lives should generally be increased to 40 years from previously utilized lives
ranging from 20 to 31.5 years. The net impact of such change in lives was to
reduce the depreciation charge for the year ended December 31, 1996 by
approximately $4,800,000.
Cash and Cash Equivalents--Cash and cash equivalents include readily
marketable securities with original maturities of three months or less.
Deferred Charges--Deferred charges include deferred leasing costs and loan
fees. Leasing costs include an allocation of the cost of Haagen Property
Management, Inc.'s ("HPMI"), an affiliate, leasing and legal departments (see
Note 13) and third party leasing commissions. Such costs are amortized on the
straight-line basis over the initial lives of the leases, which range from 5
to 20 years. Deferred financing fees are amortized over the terms of the
respective loans.
Deferred charges are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred financing costs............................. $ 17,373 $15,827
Deferred leasing costs............................... 13,406 11,203
-------- -------
Total deferred charges............................. 30,779 27,030
Accumulated amortization............................. (11,020) (8,665)
-------- -------
Deferred charges, net................................ $ 19,759 $18,365
======== =======
</TABLE>
Revenue Recognition and Tenant Receivables--Leases with tenants are
accounted for as operating leases. Minimum annual rentals are recognized on a
straight-line basis over the lease term. Unbilled deferred rent represents the
amount by which expected straight-line rental income exceeds rents currently
due under the lease agreement. During the first quarter of 1996 the Company
reassessed the recoverability of straight-line contractual rent increases as a
result of the continuing mergers and consolidations within the retail industry
and the financial
32
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
difficulties of certain retailers. Accordingly, during the first quarter of
1996 the Company recorded a non-recurring non-cash charge of $6.9 million to
increase the reserve against the receivable for straight-line rents.
Additionally, the Company has fully reserved against unbilled deferred rents
accruing during 1997 and 1996. The Company believes this to be an appropriate
and conservative approach to account for future contractual rent increases in
the current retail environment. This approach results in a reduction in
revenues recognized in 1997 and 1996 of approximately $1.2 million and $1.3
million, respectively. The Company continually evaluates its reserve for
straight-line rents and may adjust its reserve in the future for changes in
the retail environment. Total rents receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Billed tenant receivables................................ $ 5,980 $ 5,422
Allowance for uncollectible rent......................... (2,145) (1,617)
------- -------
Net billed tenant receivables............................ 3,835 3,805
------- -------
Unbilled deferred rent................................... 9,364 8,189
Allowance for unbilled deferred rent..................... (7,182) (6,007)
------- -------
Net unbilled deferred rent............................... 2,182 2,182
------- -------
Tenants receivable, net.................................. $ 6,017 $ 5,987
======= =======
</TABLE>
Included in billed tenant receivables are (1) additional rentals based on
common area maintenance expenses and certain other expenses which are accrued
in the period in which the related expense is incurred and (2) percentage
rents which are accrued on the basis of reported tenant sales.
Other Income--In connection with the development of the Media City Center,
(Burbank, CA), commitments in the form of notes receivable (terminating in
2016) were received from the Community Redevelopment Agency of the City of
Burbank (the "Burbank Agency") aggregating $51,500,000 (plus interest, subject
to certain reductions, as defined). Such commitments are repayable by the
Burbank Agency out of incremental sales and property taxes associated with
certain defined parcels within the property. Management considers amounts
receivable under these notes to be contingent in nature and accordingly has
not recorded the notes receivable. Other income has been recorded with respect
to these commitments generally in proportion to the recording of property tax
expense. Included in other income in connection with such commitments for the
years ended December 31, 1997, 1996 and 1995 is $2,656,000, $2,797,000 and
$2,756,000, respectively. At December 31, 1997 and 1996, $3,431,000 and
$2,182,000, respectively, was recorded as other receivables with respect to
such commitments from the Burbank Agency.
Under similar commitments from the Community Redevelopment Agencies of the
Cities of Fullerton and Chino, other income was recognized for the years ended
December 31, 1997, 1996 and 1995 from Fullerton Town Center of $48,000,
$57,000 and $59,000 respectively, and Country Fair Shopping Center of
$147,000, $146,000 and $122,000 respectively.
Income Taxes--The Company has elected to be taxed as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), commencing with the
taxable year ended December 31, 1993. As a result, the Company generally will
not be subject to federal and state income taxation at the corporate level to
the extent it distributes annually at least 95% of its REIT taxable income, as
defined in the Code, to its stockholders and satisfies certain other
requirements. Accordingly, no provision has been made for federal and state
income taxes in the accompanying consolidated financial statements.
33
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1997 and 1996, the tax basis of certain net assets of the
Company was approximately $88,200,000 and $65,000,000, respectively, less than
the book basis of such assets.
Earnings Per Share--During 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share. Basic loss per share for the
years ended December 31, 1997, 1996 and 1995 were computed based on the
weighted average number of shares outstanding of 13,312,311, 12,024,097 and
11,964,253, respectively. Potential common shares were antidilutive in each of
the years ended December 31, 1997, 1996 and 1995.
Accounting Pronouncements--In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information. This statement is
effective for financial statements issued for fiscal years beginning after
December 15, 1997. The Company has not yet analyzed the impact of adopting
this statement.
Reclassifications--Certain amounts have been reclassified in the 1996 and
1995 financial statements to conform to the 1997 financial statements
presentation.
3. RENTAL PROPERTIES
Rental properties consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land.................................................... $155,740 $115,776
Leasehold interests..................................... 23,097 23,038
Site improvements....................................... 48,385 47,299
Buildings and improvements.............................. 530,385 470,364
Construction in process................................. 25,672 3,088
-------- --------
Rental Properties, at cost.............................. $783,279 $659,565
======== ========
</TABLE>
4. NOTE RECEIVABLE FROM OFFICER
In December, 1997 the Company extended a loan to an executive officer in the
amount of $3,126,000. Interest shall accrue on the unpaid balance of the loan
at an annual rate of 7.45%. The loan is collateralized by all of the officer's
actual and beneficial ownership interests in the Company. The loan requires
that quarterly payments, equal to the amount of dividends and distributions
paid on the officer's ownership interests, be made to the Company. The loan
matures in December, 2004. If not paid in full, the balance of the loan is due
in full within six months subsequent to the termination of the Officer's
employment with the Company.
34
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. SECURED DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Secured Line of Credit....................................... $108,727 $ 41,200
Notes payable to life insurance companies--interest only and
interest plus
principal; variable rates ranging from 7.5% to 10.45%;
maturing April 1999
through September 2004; non-recourse........................ 66,219 61,045
Notes payable to financial institution--principal and
interest paid monthly, at
a weighted average rate of 8.98%; maturing in 2005 and 2010;
non-recourse................................................ 56,014 56,380
Notes payable to pension funds--principal and interest paid
monthly at 10.90%
and 11.45%; maturing October 2006; non-recourse............. 40,575 41,853
Floating rate tax-exempt certificates of participation--
interest only at effective
rate of 5.30%; maturing December 2014 through December 2015;
non-recourse................................................ 36,000 36,000
Community Facilities District Special Tax Bonds--interest
rates ranging from
6.0% to 8.5%; maturing in gradually increasing installments
from April 1997
through April 2021; non-recourse............................ 6,125 6,163
-------- --------
$313,660 $242,641
======== ========
</TABLE>
On December 31, 1997, the OP entered into a new $250 million secured
revolving line of credit with a financial institution (the "Credit Facility").
The Credit Facility expires on December 31, 2000 and borrowings under the
Credit Facility bear interest at a floating rate equal to London Inter-Bank
Offering Rate ("LIBOR") plus 100 basis points (6.65% at December 31, 1997). To
the extent the borrowings are in excess of the outstanding LFREI commitment
such excess will bear interest at LIBOR plus 137.5 basis points.
Upon conversion to an unsecured facility, borrowings will bear interest at
varying rates based upon the Company's leverage ratio and investment grade
rating interest. Borrowings under the Credit Facility are secured by first
mortgage liens on Montebello Town Square, The City Center, Media City Center,
Empire Center, Medford Center, Pacific Linen Plaza, Ross Plaza, Vancouver Park
Place, Smitty's Tucson, Frontier Village and Marshalls Plaza. As properties
are acquired, they may be added to the security of the Credit Facility,
thereby increasing the amount available to the Company. Subsequent to December
31, 1997, the Company drew an additional $33,433,000 in borrowings against the
Credit Facility. On February 13, 1998 the Company repaid $40,500,000 of the
outstanding balance on the Credit Facility with proceeds from the sale of
common stock to LFREI. Additionally, the Company has utilized $5.0 million of
the Credit Facility to provide various letters of credit. The Credit Facility
is subject to certain conditions, the violation of which may affect its terms.
Proceeds from the Credit Facility were used to repay amounts outstanding on
the former credit facility. In connection with the repayment of the former
credit facility, the Company incurred an extraordinary loss on the early
extinguishment of debt of $422,000 related to unamortized deferred financing
costs.
The notes payable are secured by deeds of trust and the assignment of rents
and leases associated with the related properties. Certain of the non-recourse
notes payable are subject to certain conditions, the violation of which may
result in additional recourse being available to the lenders. Certain of the
loans are subject to substantial prepayment penalties, as defined in the
respective loan agreements--See Note 11, Fair Value Disclosure of Financial
Instruments.
35
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The $6,125,000 Community Facilities District Special Tax Bonds were issued
by the City of Fontana, California, to finance the construction of the
infrastructure for Empire Center. Debt service is provided through a special
tax assessment on the parcels of land within the development. As the amount of
the liability is fixed and determinable and the related assets are subject to
a lien, the liability and corresponding site improvement assets have been
reflected in the financial statements.
Aggregate future principal payments as of December 31, 1997, excluding the
balance due on maturity of the Credit Facility, are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------ (IN THOUSANDS)
<S> <C>
1998...................................................... $ 2,902
1999...................................................... 28,225
2000...................................................... 2,940
2001...................................................... 3,280
2002...................................................... 18,693
Thereafter................................................ 148,893
--------
Total................................................. $204,933
========
</TABLE>
Total amount excludes $108,727,000 outstanding on the secured line of credit
which is due on December 31, 2000.
Restricted cash at December 31, 1997 and 1996 includes reserve funds
established in connection with the tax exempt financing. In addition, at
December 31, 1997 restricted cash includes funds restricted for the completion
of construction at the new AMC Theatres at Covina Town Square. Interest income
on such funds accrues to the benefit of the Company. Restricted cash
disbursements require the approval of the trustees of the respective
obligations.
6. SUBORDINATED DEBENTURES
In conjunction with the IPO, the Company issued 7% Convertible Subordinated
Debentures, Series A and B which mature on January 15, 2001. The Convertible
Debentures are convertible at any time after issuance and prior to maturity,
into shares of Common Stock of the Company at a conversion price of $18.00 per
share, subject to adjustment under certain conditions. The Convertible
Debentures are not redeemable by the Company prior to maturity, except for
certain reasons primarily intended to protect the Company's status as a REIT.
Interest on the Convertible Debentures is payable semi-annually in arrears on
January 15 and July 15.
The Convertible Debentures are unsecured general obligations of the Company,
subordinate to all existing and future senior indebtedness of the Company, as
defined. The Convertible Debentures are effectively subordinated to all
indebtedness of the OP.
Concurrently, the OP issued 7 1/4% Exchangeable Subordinated Debentures
which mature on December 27, 2003 and are secured by one of the Company's
Properties. The Exchangeable Debentures are exchangeable at any time for
Common Stock of the Company at an exchange price of $18.00 per share, except
for certain reasons, primarily intended to protect the Company's status as a
REIT. Interest on the Exchangeable Debentures is payable semi-annually in
arrears on June 27 and December 27.
The Exchangeable Debentures are redeemable by the OP at any time on or after
December 27, 1998, at the option of the Company, at 100% of the principal
amount thereof, together with accrued interest. The
36
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Exchangeable Debentures may be put to the OP for cash in the principal amount
thereof together with accrued interest at the election of the holders at any
time on or after December 27, 2000.
During the year ended December 31, 1995, approximately $1,000,000, of the
Convertible Debentures were converted by the holders into 55,555 shares of
Common Stock of the Company. No conversions were made in 1997 or 1996.
7. REDEEMABLE COMMON STOCK
In connection with the Separation Agreement, as described in Note 12 below,
the Company has agreed to purchase, or cause to have purchased, from the
Haagen Family, on May 25, 1999, an aggregate of 3,656,818 shares of common
stock and Operating Partnership Units (the "Shares") at a price per share
equal to the greater of $17 or the then current market price (as determined in
accordance with the Separation Agreement). Under the terms of the Separation
Agreement, the Haagen Family may not sell such shares other than certain open
market transactions on the American Stock Exchange. Included in the Shares to
be repurchased are 510,034 shares of common stock. As of December 31, 1997,
such shares have been reflected as Redeemable Common Stock at the fair value
on the date of the Separation Agreement.
8. STOCKHOLDERS' EQUITY
In addition to Common Stock, the Company's Charter authorizes the issuance
of 5,000,000 shares of Preferred Stock, par value $.01 per share. No such
shares were issued or outstanding as of December 31, 1997.
During each of the years ended December 31, 1997, 1996 and 1995, the Company
declared four quarterly distributions of $0.36 per share/unit.
9. STOCK OPTION AND INCENTIVE PLAN
On May 30, 1997 and August 14, 1997, the Company amended and restated its
1993 Stock Option and Incentive Plan (the "Option Plan") which enables
executive officers, key employees and directors of the Company, the OP and
HPMI to participate in the ownership of the Company. The Option Plan provides
for the award of a broad variety of stock-based compensation alternatives such
as non-qualified stock options, incentive stock options, and restricted stock,
and provides for the grant to Independent Directors and directors of HPMI of
non-qualified stock options. Options are granted at prices which are not less
than market at date of grant, expire ten years from the date of grant, and are
generally exercisable 25% per year over four years. The Option Plan is
administered by the Compensation Committee of the Board of Directors, which is
authorized to determine the number of shares to be subject thereto and the
terms and conditions thereof. Pursuant to the Option Plan, 2,000,000 shares of
Common Stock were reserved for issuance to eligible participants.
37
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Following is a summary of the stock option activity for the three years
ended December 31, 1997:
<TABLE>
<CAPTION>
SHARES WEIGHTED AVERAGE
UNDER OPTIONS EXERCISE PRICE
------------- ----------------
<S> <C> <C>
January 1, 1995............................... 384,990 $17.392
Granted..................................... 318,500 $12.734
Cancelled................................... (12,844) $14.948
---------
December 31, 1995............................. 690,646 $15.352
Granted..................................... 5,000 $12.250
Exercised................................... (336) $11.666
Cancelled................................... (91,042) $15.725
---------
December 31, 1996............................. 604,268 $15.280
Granted..................................... 526,500 $15.470
Exercised................................... (16,369) $12.153
Cancelled................................... (88,016) $16.120
---------
December 31, 1997............................. 1,026,383 $15.120
=========
</TABLE>
In addition to the above, during 1997 101,000 shares of restricted stock
were issued.
As of December 31, 1997, 1996 and 1995 options exercisable totaled 361,827,
297,449, and 176,289 respectively.
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE NUMBER
RANGE OF OUTSTANDING WEIGHTED AVERAGE REMAINING EXERCISABLE
EXERCISE PRICES AT 12/31/97 EXERCISE PRICE CONTRACTUAL LIFE AS OF 12/31/97
--------------- ----------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
$11.625-$13.500......... 241,283 $11.924 7.82 107,277
$14.750-$15.875......... 501,100 $15.027 9.39 300
$18.000.............. 284,000 $18.000 6.25 254,250
--------- -------
1,026,383 $15.120 8.15 361,827
========= =======
</TABLE>
The weighted average fair value of the stock options granted during 1997 and
1996 were $12.98 and $12.25, respectively. The Company applies Accounting
Principles Board Opinion No. 25 and related Interpretations in accounting for
its stock option and incentive plan. Accordingly, no compensation cost has
been recognized as a result of its initial granting of Stock Options. As a
result of the retirement of the Haagen Family (see Note 12 below), the Company
accelerated the vesting period of certain stock options and restricted stock.
As a result, the Company recorded a charge of approximately $2.7 million in
connection with such acceleration. During 1997, the Company recorded
compensation expense of $299,000 related to the amortization of deferred
compensation related to Restricted Stock granted to certain officers of the
Company. Had compensation cost for the Company's Option Plan been determined
based on the fair value at the grant dates for awards during 1997 and 1996
38
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
consistent with the method of FASB Statement 123, the Company's net loss and
loss per share for the years ended December 31, 1997 and 1996 would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net loss:
As reported.................................... $(4,645) $(2,005) $(2,408)
Pro forma...................................... $(4,824) $(2,063) $(2,436)
Net loss per share, basic:
As reported.................................... $(0.35) $(0.17) $(0.20)
Pro forma...................................... $(0.36) $(0.17) $(0.20)
</TABLE>
The fair value of options granted under the Company's Option Plan was
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for 1997 and 1996,
respectively: expected life of five years; risk free interest rate of 5.49%
and 6.13%; expected dividend yield of 8.3% and 9.0%; and expected volatility
of 22.2% and 21.01%.
10. FUTURE MINIMUM RENT
The Company has operating leases with tenants that expire at various dates
through 2037 and are either subject to scheduled fixed increases or
adjustments based on the Consumer Price Index. Generally, the leases grant
tenants renewal options and provide certain potential allowances during the
initial lease-up period. Leases also provide for additional or contingent
rents based on certain operating expenses as well as tenants sales volume.
Future minimum rent under operating leases on a cash basis, excluding tenant
reimbursements of certain costs, as of December 31, 1997 is summarized as
follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------ (IN THOUSANDS)
<S> <C>
1998...................................................... $ 71,797
1999...................................................... 67,808
2000...................................................... 63,698
2001...................................................... 58,592
2002...................................................... 52,479
Thereafter................................................ 422,113
--------
Total................................................. $736,487
========
</TABLE>
The majority of the Properties are located in Southern California. The
ability of the tenants to honor the terms of their respective leases is
dependent upon the economic, regulatory and social factors affecting the
communities and industries in which the tenants operate.
11. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value was determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is necessary to interpret market
data and develop the related estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts that
could be realized upon disposition of the financial instruments. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
39
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Billed tenant and other receivables, accounts payable and other liabilities
are carried at amounts which reasonably approximate their fair value. The fair
value of unbilled deferred rent is not determinable. It is not practical to
determine the fair value of the Community Facilities District Special Tax
Bonds as such amounts are subject to various government regulations and
restrictions.
The fixed rate mortgage notes payable totaling $162,808,000 and $159,278,000
as of December 31, 1997 and 1996, respectively, have fair values of
$181,397,000 and $168,865,000, respectively (excluding prepayment penalties)
as estimated based upon current interest rates available for the issuance of
debt with similar terms and remaining maturities. These notes were subject to
estimated prepayment penalties of $35,842,000 and $23,281,000 at December 31,
1997 and 1996, respectively, which would be required to retire these notes
prior to maturity. The carrying value of floating rate tax-exempt certificates
of participation of $36,000,000 at December 31, 1997 and 1996 approximates
their fair value. The fair market values of the Convertible Debentures at
December 31, 1997 and 1996 were $140,505,000 and $128,900,000, respectively,
based on the trading price of the Series A Convertible Debentures as of
December 31, 1997 and 1996. The fair value of the Exchangeable Debentures at
December 31, 1997 and 1996 approximates their carrying value.
The fair value estimates presented herein are based on information available
to management as of December 31, 1997 and 1996. Although management is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date, and current estimates of fair
value may differ significantly from the amounts presented herein.
12. RELATED PARTY TRANSACTIONS
Haagen Separation Agreement--On November 24, 1997, the Company entered into
an agreement (the "Separation Agreement") with Alexander Haagen, Sr.,
Charlotte Haagen and Alexander Haagen, III (collectively the "Haagen Family")
in connection with their retirement from the Company. Under the terms of the
Separation Agreement, the Haagen Family received $2.7 million in cash, vesting
of all granted stock options and restricted stock awards, and the granting and
vesting of previously committed restricted stock awards. In addition, for
certain defined periods the Company agreed to continue to provide the Haagen
Family certain medical benefits and administrative assistance. Further, the
Company has agreed to purchase, or cause to have purchased, substantially all
of the Haagen Family's ownership interests in the Company on May 25, 1999 (see
Note 7).
During 1997, the Company recorded a non-recurring charge of $9.4 million
which reflects the consideration given to the Haagen Family in connection with
the Separation Agreement. Included in accrued expenses as of December 31, 1997
is approximately $4.9 million related to the Separation Agreement of which
$2.7 million in cash was paid on January 2, 1998. The remaining $4.5 million
relates to noncash charges for the acceleration of the vesting of stock
options and restricted stock, granting and acceleration of vesting of
previously committed restricted stock awards, and the value attributed to the
Company's obligation to repurchase the Haagen Family's ownership interests in
the Company and has been charged directly to Additional Paid-in Capital.
Haagen Property Management, Inc.--Through December 31, 1997, HPMI conducted
all of the executive, construction, leasing, legal, and property management
functions pursuant to management agreements between the OP and HPMI. Prior to
December 31, 1997, the OP owned a 95% economic interest in but did not control
HPMI. The investment has been accounted for on the equity basis as an
unconsolidated subsidiary. No dividends were paid by HPMI during the three
years ended December 31, 1997. HPMI provides leasing and property management
services to other properties owned by certain third parties. In connection
with the Separation Agreement (see above), the OP purchased the remaining 5%
economic interest. As such, the balance sheet of HPMI has been consolidated as
of December 31, 1997.
40
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Summary financial information for HPMI is presented as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
Cash................................................... $ 1,014
Other assets........................................... 1,235
Total liabilities...................................... (1,595)
-------
Net equity............................................. $ 654
=======
Company's share of net equity.......................... $ 621
=======
</TABLE>
Included in liabilities of HPMI at December 31, 1996 is $1,055,000, payable
to the OP, representing reimbursable expenses and cash, held by HPMI on behalf
of the Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues........................................... $7,643 $7,768 $7,592
Operating expenses................................. 7,623 7,768 7,588
------ ------ ------
Net income for the period.......................... $ 20 $ -- $ 4
====== ====== ======
Company's share of net income...................... $ 19 $ -- $ 4
====== ====== ======
</TABLE>
Revenues include services provided by HPMI to the OP which are summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Executive and property management fees............. $4,013 $4,067 $3,680
Leasing and legal fees............................. 2,077 2,508 2,161
Acquisition and construction fees.................. 1,240 622 1,000
------ ------ ------
$7,330 $7,197 $6,841
====== ====== ======
</TABLE>
Management fees are expensed by the OP as incurred. Leasing, legal,
acquisition, and construction fees are capitalized and amortized over the
useful lives of the related leases or assets.
Development Properties--Certain properties had not completed their initial
leasing plans at the date of the Company's initial public offering; Media City
Center, Baldwin Hills Crenshaw Plaza, Empire Center, Montebello Town Square
and The City Center (the "Development Properties"). Pursuant to an agreement
among the Operating Partnership and certain limited partners that transferred
the Development Properties to the Operating Partnership such OP limited
partners had the right to receive additional partnership units in the
Operating Partnership ("OP Units") based upon the increase in net annualized
cash flow from the Development Properties between October 31, 1993 and the
expiration of the applicable lease-up period for each development property.
The increase in net annualized cash flow was based on leases signed by March
31 with the tenant open and paying rent by June 30 of the respective lease-up
periods.
41
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The lease-up period for Montebello Town Square and The City Center expired
on March 31, 1995 and resulted in the issuance of an additional 113,506 OP
Units to the OP Limited Partners. In connection with this issuance of
additional OP Units, all of the leases were executed by March 31, 1995, with
tenants paying rent by June 30, 1995, including certain leases where tenants
were not open by June 30, 1995. The independent directors determined that it
was appropriate to issue additional OP Units for all of these leases.
The lease-up period for Media City Center, Baldwin Hills Crenshaw Plaza and
Empire Center expired on March 31, 1996. In connection with the completion of
construction at Empire Center, certain improvements constructed during the
lease-up period were not leased as of March 31, 1996. The independent
directors determined that, the cost of construction of such improvements
should be borne by the Company for purposes of calculating the issuance of
additional OP Units for Empire Center and no OP Units would be issuable to the
limited partners in connection with such unleased improvements. During the
year ended December 31, 1995, the opening of approximately 38,000 square feet
of retail and restaurant space at Media City Center, principally comprising a
30,000 square foot Virgin Megastore, and the 57,000 square foot Sony/Magic
Johnson Theatres at Baldwin Hills Crenshaw Plaza, represented expansion of the
Development Properties not contemplated at the IPO. Therefore, no additional
OP Units were issued in connection with such expansions.
On August 12, 1996, the independent members of the Board of Directors
approved the issuance of 3,242,379 OP Units to the limited partners. The
market capitalization of the OP was thereby increased by $41.7 million based
upon the stock price as of August 12, 1996. The minority interest in the OP
was thereby increased from 8.0% to approximately 26.3% effective July 1, 1996.
As a result of the issuance in the third quarter of the 3,242,379 OP Units,
minority interest was increased and additional paid-in capital decreased by
approximately $31,509,000. The issuance of such additional OP Units in the
third quarter of 1996 did not have a dilutive effect on net income per share.
The number of OP Units issued and outstanding as of December 31, 1997 and 1996
was 4,279,789 and 4,286,456, respectively.
13. COMMITMENTS AND CONTINGENCIES
Operating Leases--The Company leases certain of its Properties under long-
term ground leases which are accounted for as operating leases and which
generally provide for contingent rents based on the Company's tenants' sales
volume and renewal options. Five leases expire between 2001 and 2018 and
provide for options to renew for additional periods of 20 to 30 years. Two
additional leases expire in 2012 and 2050. Future minimum rental payments
required during noncancelable lease terms as of December 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
------------------------- (IN THOUSANDS)
<S> <C>
1998...................................................... $ 1,509
1999...................................................... 1,511
2000...................................................... 1,510
2001...................................................... 1,431
2002...................................................... 1,199
Thereafter................................................ 13,045
-------
Total................................................... $20,205
=======
</TABLE>
Assuming exercise of all renewal options, aggregate future rental payments
as of December 31, 1997 are $51,903,000. Certain of the Company's ground
leases contain participation features. Participation rents paid in accordance
with such terms were $51,000, $105,000, and $95,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
42
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Litigation--The Company is subject to various legal proceedings and claims
that arise in the ordinary course of business. These matters are generally
covered by insurance. While the resolution of these matters cannot be
predicted with certainty, management believes, based on currently available
information, that the final outcome of such matters will not have a material
adverse effect on the financial statements of the Company.
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table sets forth the selected quarterly financial data for the
Company for the years ended December 31, 1997 and 1996 (in thousands, except
per share data):
<TABLE>
<CAPTION>
1997 QUARTER ENDED
-----------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ------- --------
<S> <C> <C> <C> <C>
Total Operating Revenues.......... $23,602 $21,838 $21,338 $22,183
======= ======= ======= =======
Net (loss) income................. $(6,779) $ 600 $ 601 $ 933
======= ======= ======= =======
Basic (loss) income per share..... $ (0.44) $ 0.04 $ 0.05 $ 0.08
======= ======= ======= =======
Diluted (loss) income per share... $ (0.44) $ 0.03 $ 0.04 $ 0.06
======= ======= ======= =======
<CAPTION>
1996 QUARTER ENDED
-----------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ------- --------
<S> <C> <C> <C> <C>
Total Operating Revenues.......... $23,642 $21,988 $21,211 $20,878
======= ======= ======= =======
Net (loss) income................. $ (709) $ 1,220 $ 3,116 $(5,632)
======= ======= ======= =======
Basic (loss) income per share..... $ (0.06) $ 0.10 $ 0.26 $ (0.47)
======= ======= ======= =======
Diluted (loss) income per share... $ (0.06) $ 0.08 $ 0.21 $ (0.47)
======= ======= ======= =======
</TABLE>
15. SUBSEQUENT EVENTS (UNAUDITED)
Subsequent to December 31, 1997, the Company has acquired eight unenclosed
shopping centers comprising approximately 1,052,000 square feet of Company
owned GLA for an aggregate purchase price of approximately $114 million. The
acquisitions consist of the following:
<TABLE>
<CAPTION>
TOTAL
DATE ACQUIRED PROPERTY LOCATION GLA
------------- -------- -------- -------
<S> <C> <C> <C>
January 20, 1998... Covington Square Kent, WA 155,370
March 11, 1998..... Pavilions Centre Federal Way, WA 200,191
March 27, 1998..... Bakersfield Shopping Center Bakersfield, CA 14,115
March 27, 1998..... Center of El Centro El Centro, CA 179,189
March 27, 1998..... Loma Square San Diego, CA 210,704
March 27, 1998..... Vineyards Marketplace Rancho Cucamonga, CA 56,035
March 27, 1998..... North County Plaza Carlsbad, CA 153,325
March 31, 1998..... Southpointe Plaza Sacramento, CA 83,409
</TABLE>
43
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
EACH OF THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT COSTS AND BALANCE
BEGINNING EXPENSES OR AT END
OF YEAR RENTAL REVENUE DEDUCTIONS OF YEAR
---------- -------------- ---------- -------
<S> <C> <C> <C> <C>
Year Ended December 31, 1997
Allowance for uncollectible
rent........................... $1,617 $ 1,283 $ (755) $2,145
Allowance for unbilled deferred
rent........................... 6,007 1,175 -- 7,182
------ ------- ------- ------
$7,624 $ 2,458 $ (755) $9,327
====== ======= ======= ======
Year Ended December 31, 1996
Allowance for uncollectible
rent........................... $1,607 $ 1,607 $(1,597) $1,617
Allowance for unbilled deferred
rent........................... 1,997 9,367 (5,357) 6,007
------ ------- ------- ------
$3,604 $10,974 $(6,954) $7,624
====== ======= ======= ======
Year Ended December 31, 1995
Allowance for uncollectible
rent........................... $ 327 $ 1,412 $ (132) $1,607
Allowance for unbilled deferred
rent........................... 1,954 741 (698) 1,997
------ ------- ------- ------
$2,281 $ 2,153 $ (830) $3,604
====== ======= ======= ======
</TABLE>
44
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
INITIAL COST COSTS
--------------------- CAPITALIZED
BUILDINGS SUBSEQUENT
AND TO ACQUISITION/
DESCRIPTION ENCUMBRANCES (1) LAND IMPROVEMENTS CONSTRUCTION
----------- ---------------- ---- ------------ ---------------
<S> <C> <C> <C> <C>
PROMOTIONAL/POWER
CENTERS
Southern
California...... $ (43,914) $ 30,670 $ 76,955 $ 31,577
Northern/Central
California...... -- 3,777 9,248 13,096
Oregon.......... (9,762) 9,167 16,454 16,168
--------- -------- -------- --------
(53,676) 43,614 102,657 60,841
--------- -------- -------- --------
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
Southern
California...... (66,694) 27,517 83,397 13,276
Oregon.......... -- 5,576 9,134 --
Washington...... (5,955) 21,573 29,190 --
Northern/Central
California...... (7,394) 15,704 22,922 105
--------- -------- -------- --------
(80,043) 70,370 144,643 13,381
--------- -------- -------- --------
SINGLE TENANT
FACILITIES
Southern
California...... (27,348) 7,721 24,791 1,642
Northern/Central
California...... (7,713) 2,501 10,002 --
Arizona......... (6,153) 4,261 13,934 581
--------- -------- -------- --------
(41,214) 14,483 48,727 2,223
--------- -------- -------- --------
REGIONAL MALLS
Southern
California...... (30,000) 23,842 203,623 54,875
--------- -------- -------- --------
$(204,933) $152,309 $499,650 $131,320
========= ======== ======== ========
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------
BUILDINGS
AND ACCUMULATED
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION NET
----------- -------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C>
PROMOTIONAL/POWER
CENTERS
Southern
California...... $ 30,678 $108,524 $139,202 $ (21,770) $117,432
Northern/Central
California...... 3,777 22,344 26,121 (6,403) 19,718
Oregon.......... 9,167 32,622 41,789 (1,717) 40,072
-------- ------------ -------- ------------ --------
43,622 163,490 207,112 (29,890) 177,222
-------- ------------ -------- ------------ --------
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
Southern
California...... 29,690 94,500 124,190 (27,234) 96,956
Oregon.......... 5,576 9,134 14,710 (95) 14,615
Washington...... 21,573 29,190 50,763 (130) 50,633
Northern/Central
California...... 15,704 23,027 38,731 (811) 37,920
-------- ------------ -------- ------------ --------
72,543 155,851 228,394 (28,270) 200,124
-------- ------------ -------- ------------ --------
SINGLE TENANT
FACILITIES
Southern
California...... 8,121 26,033 34,154 (7,309) 26,845
Northern/Central
California...... 2,501 10,002 12,503 (2,082) 10,421
Arizona......... 4,261 14,515 18,776 (3,902) 14,874
-------- ------------ -------- ------------ --------
14,883 50,550 65,433 (13,293) 52,140
-------- ------------ -------- ------------ --------
REGIONAL MALLS
Southern
California...... 24,692 257,648 282,340 (49,749) 232,591
-------- ------------ -------- ------------ --------
$155,740 $627,539 $783,279 $(121,202) $662,077
======== ============ ======== ============ ========
</TABLE>
- -----
(1) Excludes the secured line of credit of $108,727,000 at December 31, 1997
which is secured by various properties.
45
<PAGE>
The Company anticipates investing approximately $8,000,000 in capital
expenditures and tenant improvements over the next eighteen months. The
aggregate gross cost of property included above for federal income tax
purposes approximated $595,000,000 as of December 31, 1997.
The following table reconciles the Historical Cost of Properties from
January 1, 1995 to December 31, 1997:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of the year............... $659,565 $653,058 $618,427
Additions during the year--
Acquisition of properties.................. 91,382 -- --
Construction and Development Costs......... 32,406 13,950 34,631
Deductions during the year--
Cost of real estate sold................... -- (5,080) --
Cost of building demolished................ (74) (2,363) --
-------- -------- --------
Balance at close of the year................... $783,279 $659,565 $653,058
======== ======== ========
</TABLE>
The following table reconciles the Accumulated Depreciation from January 1,
1995 to December 31, 1997:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Balance at beginning of the year................ $104,330 $ 90,478 $71,047
Additions during the year--
Depreciation for the year................... 16,889 15,937 19,431
Deductions during the year--
Property sold............................... -- (1,213) --
Property demolished......................... (17) (872) --
-------- -------- -------
Balance at close of the year.................... $121,202 $104,330 $90,478
======== ======== =======
</TABLE>
46
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item 10 is incorporated herein by
reference to the information included under the captions "Election of
Directors" and "Executive Officers" in the Company's definitive Proxy
Statement for the 1997 Annual Meeting of Stockholders (the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item 11 is incorporated herein by
reference to the information included under the caption "Executive
Compensation" in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item 12 is incorporated herein by
reference to the information included under the caption "Security Ownership of
Certain Beneficial Owners and Management" in the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item 13 is incorporated herein by
reference to the information included under the caption "Certain Relationships
and Related Transactions" in the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. The following documents are filed as part of this report:
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
1. Independent Auditors' Report...................................... 25
Consolidated Balance Sheets as of December 31, 1997 and 1996........ 26
Consolidated Statements of Operations for Each of the Three Years
Ended December 31, 1997............................................ 27
Consolidated Statements of Stockholder's Equity for Each of the
Three Years Ended December 31, 1997................................ 28
Consolidated Statements of Cash Flows for Each of the Three Years
Ended December 31, 1997............................................ 29
Notes to Consolidated Financial Statements.......................... 30
2. Financial Statement Schedules:
II. Valuation and Qualifying Accounts............................... 44
III. Real Estate and Accumulated Depreciation....................... 45
</TABLE>
47
<PAGE>
Schedules other than those listed above are omitted because they are not
applicable, not required, or the information required to be set forth therein
is included in the financial statements or the notes thereto.
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
3. Exhibits........................................................... 48
</TABLE>
The following exhibits are included as part of this Annual Report on Form
10-K as required by Item 601 of Regulation S-K. The exhibits identified by
asterisks are the management contracts and compensatory plans or arrangements
required to be filed as exhibits to this Annual Report on Form 10-K.
<TABLE>
<C> <S>
Exhibit 3.1 Amended and Restated Charter of Alexander Haagen Properties,
Inc., incorporated herein by reference to Exhibit 3.1 to the
Company's Form 10-K for the year ended December 31, 1993 (the
"1993 Form 10-K").
Exhibit 3.2 Amended and Restated Bylaws of Alexander Haagen Properties,
Inc., incorporated herein by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-11 (No. 33-70156).
Exhibit 3.2a First Amendment to Amended and Restated Bylaws of Alexander
Haagen Properties, Inc., dated as of August 12, 1996,
incorporated herein by reference to Exhibit 3.2a to the
Company's Form 10-K for the year ended December 31, 1996 (the
"1996 Form 10-K").
Exhibit 4.1 Indenture, dated as of December 27, 1993, between Alexander
Haagen Properties, Inc. and The First National Bank of Boston
as Trustee with respect to the 7 1/2% Convertible Subordinated
Debentures due 2001, Series A, incorporated herein by
reference to Exhibit 4.1 to the 1993 Form 10-K.
Exhibit 4.2 Specimen 7 1/2% Convertible Subordinated Debenture due 2001,
Series A, incorporated herein by reference to Exhibit 4.2 to
the 1993 Form 10-K.
Exhibit 4.3 Fiscal Agency Agreement, dated as of December 27, 1993, between
Alexander Haagen Properties, Inc. and The First National Bank
of Boston as Fiscal Agent with respect to the 7
1/2% Convertible Subordinated Debentures due 2001, Series B,
incorporated herein by reference to Exhibit 4.3 to the 1993
Form 10-K.
Exhibit 4.4 Form of 7 1/2% Convertible Subordinated Debentures due 2001,
Series B, incorporated herein by reference to Exhibit 4.4 to
the 1993 Form 10-K.
Exhibit 4.5 Specimen Common Stock Certificate, incorporated herein by
reference to Exhibit 4.5 to the 1993 Form 10-K.
Exhibit 4.6 Form of 7 1/4% Exchangeable Subordinated Debentures due 2003 of
Alexander Haagen Properties, L.P., incorporated herein by
reference to Exhibit 4.6 to the 1993 Form 10-K.
Exhibit 10.1 Agreement of Limited Partnership of Alexander Haagen Properties
Operating Partnership, L.P., dated as of December 27, 1993,
incorporated herein by reference to Exhibit 10.1 to the 1993
Form 10-K.
Exhibit 10.2 Amendment No. 1 to the Agreement of Limited Partnership of
Alexander Haagen Properties Operating Partnership, L.P., dated
as of January 1, 1994, incorporated herein by reference to
Exhibit 10.2 to the Company's Form 10-K for the year ended
December 31, 1994 (the "1994 10-K").
Exhibit 10.3 Registration Rights Agreement, dated as of December 27, 1993,
among Alexander Haagen Properties, Inc. and the persons named
therein, incorporated herein by reference to Exhibit 10.2 to
the Company's Registration Statement on Form S-11 (No. 33-
70156).
*Exhibit 10.4 Amended and Restated 1993 Stock Option and Incentive Plan for
Officers, Directors and Key Employees of Alexander Haagen
Properties, Inc., Alexander Haagen Properties Operating
Partnership, L.P., and Haagen Property Management, Inc.,
incorporated herein by reference to the Company's 1996 Proxy
Statement.
</TABLE>
48
<PAGE>
<TABLE>
<C> <S>
*Exhibit 10.5 401(k) Plan and Trust Agreement of Alexander Haagen Properties,
Inc. and its affiliated and related companies, incorporated
herein by reference to Exhibit 10.4 to the 1993 Form 10-K.
*Exhibit 10.6 Employment Agreement, dated as of December 27, 1993, among
Alexander Haagen Properties, Inc., Haagen Property Management,
Inc. and Fred W. Bruning, incorporated herein by reference to
Exhibit 10.9 to the 1993 Form 10-K.
Exhibit 10.7 Form of Indemnification Agreement between Alexander Haagen
Properties, Inc. and its directors and officers, incorporated
herein by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-11 (No. 33-70156).
Exhibit 10.8 Purchase Agreement, dated as of December 27, 1993, among
Alexander Haagen Properties Operating Partnership, L.P.,
Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch
Special Value Fund, Inc., Merrill Lynch Multinational
Investment Portfolios Equity/Convertible Series (Global
Allocation Portfolio), with respect to the 7 1/4% Exchangeable
Subordinated Debentures due 2003, incorporated herein by
reference to Exhibit 10.12 to the 1993 Form 10-K.
Exhibit 10.9 Property Management Agreement, dated as of December 27, 1993,
between Haagen Property Management, Inc. and Alexander Haagen
Properties Operating Partnership, L.P., incorporated herein by
reference to Exhibit 10.13 to the 1993 Form 10-K.
Exhibit 10.10 Agreement for Transfer of Realty and Assets, dated as of
December 27, 1993, by and among Alexander Haagen Properties
Operating Partnership, L.P. and Montebello Commercial
Properties, Haagen GDH Partnership, Center Partners, H&H
Oceanside Co., El Camino North, Baldwin Hills Associates,
Haagen-Burbank Partnership, Date Palm Partnership, Alexander
Haagen III, Betty Haagen, Seymour Kreshek, Haagen-Fontana
Partnership, Lake Forest Shopping Center, Haagen-San Francisco
Partnership, Haagen GDH-2 Partnership, Haagen-Vista Way
Associates, and Haagen Alhambra Associates, incorporated
herein by reference to Exhibit 10.14 to the 1993 Form 10-K.
Exhibit 10.11 Amendment No. 1 to Agreement for Transfer of Realty and Assets,
dated as of December 27, 1993, by and among Alexander Haagen
Properties Operating Partnership, L.P. and Montebello
Commercial Properties, Haagen GDH Partnership, Center
Partners, H&H Oceanside Co., El Camino North, Baldwin Hills
Associates, Haagen-Burbank Partnership, Date Palm Partnership,
Alexander Haagen III, Betty Haagen, Seymour Kreshek, Haagen-
Fontana Partnership, Lake Forest Shopping Center, Haagen-San
Francisco Partnership, Haagen GDH-2 Partnership, Haagen-Vista
Way Associates, and Haagen Alhambra Associates, incorporated
herein by reference to Exhibit 10.15 to the 1993 Form 10-K.
Exhibit 10.12 Agreement for Transfer of Realty and Assets, dated as of
December 27, 1993, by and among Alexander Haagen Properties,
Inc., Alexander Haagen, Sr. and Charlotte Haagen, Co-Trustees
of the Haagen Living Trust dated August 17, 1988, Saul S.
Kreshek, Saul S. Kreshek and Seymour Kreshek, Co-Trustees of
the Helen Roseman Trust, Saul S. Kreshek and Seymour Kreshek,
Co-Trustees of the Alex Kreshek Revocable Trust, Jeffrey
Harris Kreshek 1992 Irrevocable Trust, Bradley Howard Kreshek
1992 Irrevocable Trust, Howard Andrew Kreshek 1992 Irrevocable
Trust, Haagen-Gardena Gateway Partnership, Haagen-Hollywood
Partnership, San Fernando Mission Partnership, and Haagen GDH
Partnership, incorporated herein by reference to Exhibit 10.16
to the 1993 Form 10-K.
Exhibit 10.13 Amendment No. 1 to Agreement for Transfer of Realty and Assets,
dated as of December 27, 1993, by and among Alexander Haagen
Properties, Inc., Alexander Haagen, Sr. and Charlotte Haagen,
Co-Trustees of the Haagen Living Trust dated August 17, 1988,
Saul S. Kreshek, Saul S. Kreshek and Seymour Kreshek, Co-
Trustees of the Helen Roseman Trust, Saul S. Kreshek and
Seymour Kreshek, Co-Trustees of the Alex Kreshek Revocable
Trust, Jeffrey Harris Kreshek 1992 Irrevocable Trust, Bradley
Howard Kreshek 1992 Irrevocable Trust, Howard Andrew Kreshek
1992 Irrevocable Trust, Haagen-Gardena Gateway Partnership,
Haagen-Hollywood Partnership, San Fernando Mission
Partnership, and Haagen GDH Partnership, incorporated herein
by reference to Exhibit 10.17 to the 1993 Form 10-K.
</TABLE>
49
<PAGE>
<TABLE>
<C> <S>
Exhibit 10.14 Partnership Interests Exchange Agreement, dated as of December
27, 1993, by and among Alexander Haagen Properties, Inc.,
Alexander Haagen, Sr. and Charlotte Haagen, Co-Trustees of the
Haagen Living Trust, Seymour Kreshek and Arline Kreshek, Co-
Trustees of the Seymour and Arline Kreshek Living Trust, and
Alexander Haagen III, incorporated herein by reference to
Exhibit 10.18 to the 1993 Form 10-K.
Exhibit 10.15 Partnership Interests Exchange Agreement between Willowbrook
General Partnership and Alexander Haagen Operating Partnership,
L.P., dated as of December 27, 1993, incorporated herein by
reference to Exhibit 10.19 to the 1993 Form 10-K.
Exhibit 10.16 Contribution Agreement, dated as of December 27, 1993, between
Alexander Haagen Properties Operating Partnership, L.P. and
Alexander Haagen Properties, Inc., incorporated herein by
reference to Exhibit 10.20 to the 1993 Form 10-K.
Exhibit 10.17 Amendment No. 1 to Contribution Agreement between Alexander
Haagen Properties Operating Partnership, L.P. and Alexander
Haagen Properties, Inc., dated as of December 27, 1993,
incorporated herein by reference to Exhibit 10.21 to the 1993
Form 10-K.
Exhibit 10.18 Option Properties Agreement, dated as of December 27, 1993,
among Haagen-Fontana Partnership, Haagen-Alhambra Retail
Partnership and Alexander Haagen Properties Operating
Partnership, L.P., incorporated herein by reference to Exhibit
10.22 to the 1993 Form 10-K.
Exhibit 10.19 Termination of Option Agreement, dated November 30, 1994,
incorporated herein by reference to Exhibit 10.24 to the 1994
Form 10-K.
Exhibit 10.20 Development Properties Agreement, dated as of December 27, 1993,
among Haagen-Burbank Partnership, Haagen-Fontana Partnership,
Baldwin Hills Associates, Montebello Commercial Properties,
Haagen-San Francisco Partnership and Alexander Haagen
Properties Operating Partnership, L.P., incorporated herein by
reference to Exhibit 10.23 to the 1993 Form 10-K.
Exhibit 10.21 Form of Waiver and Recontribution Agreement among Executive
Officers and Alexander Haagen Properties Operating Partnership,
L.P., incorporated herein by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-11 (No. 33-70156).
Exhibit 10.22 Form of Indemnity Agreement among Executive Officers and
Alexander Haagen Properties Operating Partnership, L.P.,
incorporated herein by reference to Exhibit 10.17 to the
Company's Registration Statement on Form S-11 (No. 33-70156).
Exhibit 10.23 Registration Rights Agreement, dated as of December 27, 1993,
among Alexander Haagen Properties, Inc., Merrill Lynch Global
Allocation Fund, Inc., Merrill Lynch Special Value Fund, Inc.,
and Merrill Lynch Multinational Investment Portfolios
Equity/Convertible Series (Global Allocation Portfolio),
incorporated herein by reference to Exhibit 10.26 to the 1993
Form 10-K.
Exhibit 10.24 Indemnity Agreement, dated as of December 27, 1993, by Alexander
Haagen Properties Operating Partnership, L.P. to National
Westminster Bank PLC, Capital Markets Branch, as agent, for the
benefit of Merrill Lynch Global Allocation Fund, Inc., Merrill
Lynch Special Value Fund, Inc., and Merrill Lynch Multinational
Investment Portfolios Equity/Convertible Series (Global
Allocation Portfolio), incorporated herein by reference to
Exhibit 10.27 to the 1993 Form 10-K.
Exhibit 10.25 Loan Agreement, dated as of March 15, 1995, by and between the
Alexander Haagen Properties Finance Partnership, L.P. and
Nomura Asset Capital Corporation, incorporated herein by
reference to Exhibit 10.31 to the 1994 Form 10-K.
Exhibit 10.26 First Amendment to the Amended and Restated 1993 Stock Option
and Incentive Plan for Officers, Directors and Key Employees of
Alexander Haagen Properties, Inc. and Haagen Property
Management, Inc., incorporated herein by reference to Exhibit
10.33 to the 1996 Form 10-K.
</TABLE>
50
<PAGE>
<TABLE>
<C> <S>
Exhibit 10.27 Second Amendment to Agreement of Limited Partnership of
Alexander Haagen Properties Operating Partnership, L.P., dated
as of March, 1995, incorporated herein by reference to Exhibit
10.34 to the 1996 Form 10-K.
Exhibit 10.28 Third Amendment to Agreement of Limited Partnership of Alexander
Haagen Properties Operating Partnership, L.P., dated as of
February 27, 1997, incorporated herein by reference to Exhibit
10.35 to the 1996 Form 10-K.
Exhibit 10.29 Stock Purchase Agreement by and among Prometheus Western Retail,
LLC and LF Strategic Realty Investors, L.P. and Alexander
Haagen Properties, Inc., dated as of June 1, 1997, incorporated
herein by reference to the Company's 1997 Proxy Statement.
Exhibit 10.30 Stockholders Agreement by and among Lazard Freres Real Estate
Investors, LLC, LF Strategic Realty Investors, L.P., Prometheus
Western Realty Investors, LLC and Alexander Haagen Properties,
Inc., dated as of June 1, 1997, incorporated herein by
reference to the Company's 1997 Proxy Statement.
Exhibit 10.31 Registration Rights Agreement by and among Alexander Haagen
Properties, Inc. and Prometheus Western Retail, LLC, dated as
of June 1, 1997, incorporated herein by reference to the
Company's 1997 Proxy Statement.
Exhibit 10.32 Third Amendment to the Amended and Restated 1993 Stock Option
and Incentive Plan for Officers, Directors and Key Employees of
Alexander Haagen Properties, Inc., Alexander Haagen Properties
Operating Partnership, L.P. and Haagen Property Management,
Inc., incorporated herein by reference to the Company's 1997
Proxy Statement.
Exhibit 10.33 Fourth Amendment to the Amended and Restated 1993 Stock Option
and Incentive Plan for Officers, Directors and Key Employees of
Alexander Haagen Properties, Inc., Alexander Haagen Properties
Operating Partnership, L.P. and Haagen Property Management,
Inc., incorporated herein by reference to the Company's 1997
Proxy Statement.
Exhibit 10.34 Separation Agreement and Release by and between Alexander
Haagen, Sr., Alexander Haagen, III, Charlotte Haagen, Autumn
Haagen, Alexander Haagen III & Betty Haagen Trust fbo Alexander
Haagen IV UA 10/24/88, Alexander Haagen III & Betty Haagen
Trust fbo Autumn Haagen UA 10/24/88, Alexander Haagen III &
Betty Haagen Trust fbo Andrew Haagen UA 10/28/88, Haagen Living
Trust dated August 17, 1988, as amended and restated as of
April 18, 1996, Haagen Limited Partnership and Lazard Freres
Real Estate Investors, LLC, Lf Strategic Realty Investors,
L.P., Prometheus Western Retail LLC, and Alexander Haagen
Properties, Inc., Alexander Haagen Properties Operating
Partnership, L.P. and Haagen Property Management, Inc., dated
as of November 24, 1997, incorporated herein by reference to
Exhibit No. 1 to Amendment #4 to the 13D filed by Prometheus
Western Retail, LLC and LF Strategic Investors, L.P. dated as
of December 5, 1997.
Exhibit 10.35 Loan and Security Agreement by and between Alexander Haagen
Properties Operating Partnership, L.P. and Fred W. Bruning,
dated as of December 29, 1997.
Exhibit 10.36 Credit Agreement among Alexander Haagen Properties Operating
Partnership, L.P, The Chase Manhattan Bank, Chase Securities,
Inc., Credit Lyonnais, New York Branch and CIBC, Inc., dated as
of December 31, 1997.
Exhibit 21.1 Subsidiaries of the Company, incorporated herein by reference to
Exhibit 10.34 to the Company's 1995 Form 10-K.
Exhibit 23.1 Consent of Deloitte & Touche LLP
Exhibit 27 Financial Data Table.
</TABLE>
B. Reports on Form 8-K
Form 8-K Stock Purchase Agreement, June 12, 1997
There were no Form 8-K reports filed by the Company during the years ended
December 31, 1996 and 1995.
51
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Manhattan Beach,
State of California, on the 16th day of March, 1998.
ALEXANDER HAAGEN PROPERTIES, INC.
/s/ Edward D. Fox
By: _________________________________
Edward D. Fox
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Arthur Solomon Chairman of the Board March 16, 1998
____________________________________
Arthur Solomon
/s/ Edward D. Fox Director, Chief Executive March 16, 1998
____________________________________ Officer and President
Edward D. Fox (Principal Executive
Officer)
/s/ R. Bruce Andrews Director March 16, 1998
____________________________________
R. Bruce Andrews
/s/ Robert Barnum Director March 16, 1998
____________________________________
Robert Barnum
/s/ Fred W. Bruning Director, Senior Vice March 16, 1998
____________________________________ President--Chief Investment
Fred W. Bruning Officer
/s/ Warner Heineman Director March 16, 1998
____________________________________
Warner Heineman
/s/ Anthony Meyer Director March 16, 1998
____________________________________
Anthony Meyer
/s/ Fred L. Riedman Director March 16, 1998
____________________________________
Fred L. Riedman
/s/ Stuart J.S. Gulland Senior Vice President--Chief March 16, 1998
____________________________________ Financial Officer
Stuart J.S. Gulland (Principal Financial
Officer)
/s/ Edward A. Stokx Controller (Principal March 16, 1998
____________________________________ Accounting Officer)
Edward A. Stokx
</TABLE>
52
<PAGE>
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
------------------ --------------------------
<C> <S> <C>
3.1 Amended and Restated Charter of Alexander Incorporated herein by
Haagen Properties, Inc. reference to Exhibit 3.1 to
the Company's 1993 Form 10-
K.
3.2 Amended and Restated Bylaws of Alexander Incorporated herein by
Haagen Properties, Inc. reference to Exhibit 3.2 to
the Company's Registration
Statement on Form S-11 (No.
33-70156).
3.2a First Amendment to Amended and Restated Incorporated herein by
Bylaws of Alexander Haagen Properties, reference to Exhibit 3.2a to
Inc., dated as of August 12, 1996. the Company's 1996 Form 10-K
4.1 Indenture, dated as of December 27, 1993, Incorporated herein by
between Alexander Haagen Properties, Inc. reference to Exhibit 4.1 to
and The First National Bank of Boston as the Company's 1993 Form 10-
Trustee with respect to the 7% Convertible K.
Subordinated Debentures due 2001, Series
A.
4.2 Specimen 7 1/2% Convertible Subordinated Incorporated herein by
Debenture due 2001, Series A. reference to Exhibit 4.2 to
the Company's 1993 Form 10-
K.
4.3 Fiscal Agency Agreement, dated as of Incorporated herein by
December 27, 1993, between Alexander reference to Exhibit 4.3 to
Haagen Properties, Inc. and The First the Company's 1993 Form 10-
National Bank of Boston as Fiscal Agent K.
with respect to the 7 1/2% Convertible
Subordinated Debentures due 2001, Series
B.
4.4 Form of 7 1/2% Convertible Subordinated Incorporated herein by
Debentures due 2001, Series B. reference to Exhibit 4.4 to
the Company's 1993 Form 10-
K.
4.5 Specimen Common Stock Certificate. Incorporated herein by
reference to Exhibit 4.5 to
the Company's 1993 Form 10-
K.
4.6 Form of 7 1/4% Exchangeable Subordinated Incorporated herein by
Debentures due 2003 of Alexander Haagen reference to Exhibit 4.6 to
Properties, L.P. the Company's 1993 Form 10-
K.
10.1 Agreement of Limited Partnership of Alexander Incorporated herein by
Haagen Properties Operating Partnership, reference to Exhibit 10.1 to
L.P., dated as of December 27, 1993. the Company's 1993 Form 10-
K.
10.2 Amendment No. 1 to the Agreement of Limited Incorporated herein by
Partnership of Alexander Haagen Properties reference to Exhibit 10.2 to
Operating Partnership, L.P., dated as of the Company's Form 10-K for
January 1, 1994. the year ended December 31,
1994 (the "1994 10-K").
10.3 Registration Rights Agreement, dated as of Incorporated herein by
December 27, 1993, among Alexander Haagen reference to Exhibit 10.2 to
Properties, Inc. and the persons named the Company's Registration
therein. Statement on Form S-11 (No.
33-70156).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
------------------ --------------------------
<C> <S> <C>
10.4 Amended and Restated 1993 Stock Option and Incorporated herein by
Incentive Plan for Officers, Directors and reference to the Company's
Key Employees of Alexander Haagen 1996 Proxy Statement.
Properties, Inc., Alexander Haagen
Properties Operating Partnership, L.P., and
Haagen Property Management, Inc.
10.5 401(k) Plan and Trust Agreement of Alexander Incorporated herein by
Haagen Properties, Inc. and its affiliated reference to Exhibit 10.4 to
and related companies. the Company's 1993 Form 10-
K.
10.6 Employment Agreement, dated as of December Incorporated herein by
27, 1993, among Alexander Haagen Properties, reference to Exhibit 10.9 to
Inc., Haagen Property Management, Inc. and the Company's 1993 Form 10-
Fred W. Bruning. K.
10.7 Form of Indemnification Agreement between Incorporated herein by
Alexander Haagen Properties, Inc. and its reference to Exhibit 10.4 to
directors and officers. the Company's Registration
Statement on Form S-11 (No.
33-70156).
10.8 Purchase Agreement, dated as of December 27, Incorporated herein by
1993, among Alexander Haagen Properties reference to Exhibit 10.12
Operating Partnership, L.P., Merrill Lynch to the Company's 1993 Form
Global Allocation Fund, Inc., Merrill Lynch 10-K.
Special Value Fund, Inc., Merrill Lynch
Multinational Investment Portfolios
Equity/Convertible Series (Global Allocation
Portfolio), with respect to the 7%
Exchangeable Subordinated Debentures due
2003.
10.9 Property Management Agreement, dated as of Incorporated herein by
December 27, 1993, between Haagen Property reference to Exhibit 10.13
Management, Inc. and Alexander Haagen to the Company's 1993 Form
Properties Operating Partnership, L.P. 10-K.
10.10 Agreement for Transfer of Realty and Assets, Incorporated herein by
dated as of December 27, 1993, by and among reference to Exhibit 10.14
Alexander Haagen Properties Operating to the Company's 1993 Form
Partnership, L.P. and Montebello Commercial 10-K.
Properties, Haagen GDH Partnership, Center
Partners, H&H Oceanside Co., El Camino
North, Baldwin Hills Associates, Haagen-
Burbank Partnership, Date Palm Partnership,
Alexander Haagen III, Betty Haagen, Seymour
Kreshek, Haagen-Fontana Partnership, Lake
Forest Shopping Center, Haagen-San Francisco
Partnership, Haagen GDH-2 Partnership,
Haagen-Vista Way Associates, and Haagen
Alhambra Associates.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
------------------ --------------------------
<C> <S> <C>
10.11 Amendment No. 1 to Agreement for Transfer of Incorporated herein by
Realty and Assets, dated as of December 27, reference to Exhibit 10.15
1993, by and among Alexander Haagen to the Company's 1993 Form
Properties Operating Partnership, L.P. and 10-K.
Montebello Commercial Properties, Haagen GDH
Partnership, Center Partners, H&H Oceanside
Co., El Camino North, Baldwin Hills
Associates, Haagen-Burbank Partnership, Date
Palm Partnership, Alexander Haagen III,
Betty Haagen, Seymour Kreshek, Haagen-
Fontana Partnership, Lake Forest Shopping
Center, Haagen-San Francisco Partnership,
Haagen GDH-2 Partnership, Haagen-Vista Way
Associates, and Haagen Alhambra Associates.
10.12 Agreement for Transfer of Realty and Assets, Incorporated herein by
dated as of December 27, 1993, by and among reference to Exhibit 10.16
Alexander Haagen Properties, Inc., Alexander to the Company's 1993 Form
Haagen, Sr. and Charlotte Haagen, Co- 10-K.
Trustees of the Haagen Living Trust dated
August 17, 1988, Saul S. Kreshek, Saul S.
Kreshek and Seymour Kreshek, Co-Trustees of
the Helen Roseman Trust, Saul S. Kreshek and
Seymour Kreshek, Co-Trustees of the Alex
Kreshek Revocable Trust, Jeffrey Harris
Kreshek 1992 Irrevocable Trust,
Bradley Howard Kreshek 1992 Irrevocable
Trust, Howard Andrew Kreshek 1992
Irrevocable Trust, Haagen-Gardena Gateway
Partnership, Haagen-Hollywood Partnership,
San Fernando Mission Partnership, and Haagen
GDH Partnership.
10.13 Amendment No. 1 to Agreement for Transfer of Incorporated herein by
Realty and Assets, dated as of December 27, reference to Exhibit 10.17
1993, by and among Alexander Haagen to the Company's 1993 Form
Properties, Inc., Alexander Haagen, Sr. and 10-K.
Charlotte Haagen, Co-Trustees of the Haagen
Living Trust dated August 17, 1988, Saul S.
Kreshek, Saul S. Kreshek and Seymour
Kreshek, Co-Trustees of the Helen Roseman
Trust, Saul S. Kreshek and Seymour Kreshek,
Co-Trustees of the Alex Kreshek Revocable
Trust, Jeffrey Harris Kreshek 1992
Irrevocable Trust, Bradley Howard Kreshek
1992 Irrevocable Trust, Howard Andrew
Kreshek 1992 Irrevocable Trust, Haagen-
Gardena Gateway Partnership, Haagen-
Hollywood Partnership, San Fernando Mission
Partnership, and Haagen GDH Partnership.
10.14 Partnership Interests Exchange Agreement, Incorporated herein by
dated as of December 27, 1993, by and among reference to Exhibit 10.18
Alexander Haagen Properties, Inc., Alexander to the Company's 1993 Form
Haagen, Sr. and Charlotte Haagen, Co- 10-K.
Trustees of the Haagen Living Trust, Seymour
Kreshek and Arline Kreshek, Co-Trustees of
the Seymour and Arline Kreshek Living Trust,
and Alexander Haagen III.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
------------------ --------------------------
<C> <S> <C>
10.15 Partnership Interests Exchange Agreement Incorporated herein by
between Willowbrook General Partnership and reference to Exhibit 10.19
Alexander Haagen Operating Partnership, to the Company's 1993 Form
L.P., dated as of December 27, 1993. 10-K.
10.16 Contribution Agreement, dated as of December Incorporated herein by
27, 1993, between Alexander Haagen reference to Exhibit 10.20
Properties Operating Partnership, L.P. and to the Company's 1993 Form
Alexander Haagen Properties, Inc. 10-K.
10.17 Amendment No. 1 to Contribution Agreement Incorporated herein by
between Alexander Haagen Properties reference to Exhibit 10.21
Operating Partnership, L.P. and Alexander to the Company's 1993 Form
Haagen Properties, Inc., dated as of 10-K.
December 27, 1993.
10.18 Option Properties Agreement, dated as of Incorporated herein by
December 27, 1993, among Haagen-Fontana reference to Exhibit 10.22
Partnership, Haagen-Alhambra Retail to the Company's 1993 Form
Partnership and Alexander Haagen Properties 10-K.
Operating Partnership, L.P.
10.19 Termination of Option Agreement, dated Incorporated herein by
November 30, 1994. reference to Exhibit 10.24
to the Company's 1994 Form
10-K.
10.20 Development Properties Agreement, dated as of Incorporated herein by
December 27, 1993, among Haagen-Burbank reference to Exhibit 10.23
Partnership, Haagen-Fontana Partnership, to the Company's 1993 Form
Baldwin Hills Associates, Montebello 10-K.
Commercial Properties, Haagen-San Francisco
Partnership and Alexander Haagen Properties
Operating Partnership, L.P.
10.21 Form of Waiver and Recontribution Agreement Incorporated herein by
among Executive Officers and Alexander reference to Exhibit 10.16
Haagen Properties Operating Partnership, to the Company's
L.P. Registration Statement on
Form S-11 (No. 33-70156).
10.22 Form of Indemnity Agreement among Executive Incorporated herein by
Officers and Alexander Haagen Properties reference to Exhibit 10.17
Operating Partnership, L.P. to the Company's
Registration Statement on
Form S-11 (No. 33-70156).
10.23 Registration Rights Agreement, dated as of Incorporated herein by
December 27, 1993, among Alexander Haagen reference to Exhibit 10.26
Properties, Inc. and Merrill Lynch Global to the Company's 1993 Form
Allocation Fund, Inc., Merrill Lynch Special 10-K.
Value Fund, Inc., and Merrill Lynch
Multinational Investment Portfolios
Equity/Convertible Series (Global Allocation
Portfolio).
10.24 Indemnity Agreement, dated as of December 27, Incorporated herein by
1993, by Alexander Haagen Properties reference to Exhibit 10.27
Operating Partnership, L.P. to National to the Company's 1993 Form
Westminster Bank PLC, Capital Markets 10-K.
Branch, as agent, for the benefit of Merrill
Lynch Global Allocation Fund, Inc., Merrill
Lynch Special Value Fund, Inc., and Merrill
Lynch Multinational Investment Portfolios
Equity/Convertible Series (Global Allocation
Portfolio).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
------------------ --------------------------
<C> <S> <C>
10.25 Loan Agreement, dated as of March 15, 1995, Incorporated herein by
by and between the Alexander Haagen reference to Exhibit 10.31
Properties Finance Partnership, L.P. and to the Company's Form 10-K.
Nomura Asset Capital Corporation.
10.26 First Amendment to the Amended and Restated Incorporated herein by
1993 Stock Option and Incentive Plan for reference to Exhibit 10.33
Officers, Directors and Key Employees of to the Company's 1996 Form
Alexander Haagen Properties, Inc. and Haagen 10-K
Property Management, Inc.
10.27 Second Amendment to Agreement of Limited Incorporated herein by
Partnership of Alexander Haagen Properties reference to Exhibit 10.34
Operating Partnership, L.P., dated as of to the Company's 1996 Form
March, 1995. 10-K
10.28 Third Amendment to Agreement of Limited Incorporated herein by
Partnership of Alexander Haagen Properties reference to Exhibit 10.35
Operating Partnership, L.P., dated as of to the Company's 1996 Form
February 27, 1997. 10-K
10.29 Stock Purchase Agreement by and among Incorporated herein by
Prometheus Western Retail, LLC and LF reference to the Company's
Strategic Realty Investors, L.P. and 1997 Proxy Statement.
Alexander Haagen Properties, Inc., dated as
of June 1, 1997, incorporated herein by
reference to the Company's 1997 Proxy
Statement.
10.30 Stockholders Agreement by and among Lazard Incorporated herein by
Freres Real Estate Investors, LLC, LF reference to the Company's
Strategic Realty Investors, L.P., Prometheus 1997 Proxy Statement.
Western Realty Investors, LLC and Alexander
Haagen Properties, Inc., dated as of June 1,
1997.
10.31 Registration Rights Agreement by and among Incorporated herein by
Alexander Haagen Properties, Inc. and reference to the Company's
Prometheus Western Retail, LLC, dated as of 1997 Proxy Statement.
June 1, 1997.
10.32 Third Amendment to the Amended and Restated Incorporated herein by
1993 Stock Option and Incentive Plan for reference to the Company's
Officers, Directors and Key Employees of 1997 Proxy Statement.
Alexander Haagen Properties, Inc., Alexander
Haagen Properties Operating Partnership,
L.P. and Haagen Property Management, Inc.
10.33 Fourth Amendment to the Amended and Restated Incorporated herein by
1993 Stock Option and Incentive Plan for reference to the Company's
Officers, Directors and Key Employees of 1997 Proxy Statement.
Alexander Haagen Properties, Inc., Alexander
Haagen Properties Operating Partnership,
L.P. and Haagen Property Management, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
- ------- ----------- --------------------------
<S> <C> <C>
10.34 Separation Agreement and Release by and Incorporated herein by
between Alexander Haagen, Sr., Alexander reference to Exhibit No. 1 to
Haagen, III, Charlotte Haagen, Autumn Haagen, Amendment #4 to the 13D filed
Alexander Haagen III & Betty Haagen Trust fbo by Prometheus Western Retail,
Alexander Haagen IV UA 10/24/88, Alexander LLC and LF Strategic
Haagen III & Betty Haagen Trust fbo Autumn Investors, L.P. dated as of
Haagen UA 10/24/88, Alexander Haagen III & December 5, 1997.
Betty Haagen Trust fbo Andrew Haagen UA
10/28/88, Haagen Living Trust dated August
17, 1988, as amended and restated as of April
18, 1996, Haagen Limited Partnership and
Lazard Freres Real Estate Investors, LLC, LF
Strategic Realty Investors, L.P., Prometheus
Western Retail LLC, and Alexander Haagen
Properties, Inc., Alexander Haagen Properties
Operating Partnership, L.P. and Haagen
Property Management, Inc., dated as of
November 24, 1997.
10.35 Loan and Security Agreement by and between
Alexander Haagen Properties Operating
Partnership, L.P. and Fred W. Bruning, dated
as of December 29, 1997.
10.36 Credit Agreement among Alexander Haagen
Properties Operating Partnership, L.P, The
Chase Manhattan Bank, Chase Securities, Inc.,
Credit Lyonnais, New York Branch and CIBC,
Inc., dated as of December 31, 1997.
21.1 Subsidiaries of the Company. Incorporated herein by
reference to Exhibit 10.34 to
the Company's 1995 Form 10-K.
23.1 Consent of Deloitte & Touche LLP.
27 Financial Data Table
</TABLE>
<PAGE>
EXHIBIT 10.35
LOAN AND SECURITY AGREEMENT
---------------------------
This Loan and Security Agreement ("Agreement") dated as of December 29,
1997 is entered into by and between Alexander Haagen Properties Operating
Partnership, L.P., a California limited partnership ("Lender") and Fred W.
Bruning, an individual ("Borrower").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower has heretofore entered into a certain financing agreement
with Alexander Haagen, Sr. dated as of July 1, 1996 (the "Haagen Loan");
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may advance and otherwise
provide financial accommodations to Borrower (the "Loan" as hereinafter defined)
to repay Borrower's obligations with respect to the amounts outstanding under
the Haagen Loan; and
WHEREAS, Lender is willing to advance funds to Borrower in order to
discharge such obligations and provide such financial accommodations on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
-----------
All terms used herein which are defined in Division 1 or Division 9 of the
Uniform Commercial Code as enacted in the State of California shall have the
meanings given therein unless otherwise defined in this Agreement. All
references to the plural herein shall also mean the singular and to the singular
shall also mean the plural. All references to Borrower and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. Any
accounting term used herein unless otherwise defined in this Agreement shall
have the meanings customarily given to such term in accordance with GAAP. For
purposes of this Agreement, the following terms shall have the respective
meanings given to them below:
1.1 Reserved.
1.2 "Collateral" shall have the meaning set forth in Section 4 hereof.
1.3 "Employment Agreement" means that certain Employment Agreement dated
as of December 27, 1993, as amended by that certain Amendment to Employment
Agreement dated as of December 31, 1995, together with all further amendments,
supplements, replacements and extensions to either, or both, of such documents,
by and among Alexander Haagen Properties, Inc. ("AHP"), Alexander Haagen
Properties Operating Partnership, L.P. ("AHPOP"), or Haagen Property Management,
Inc. ("HPMI") and Borrower.
1
<PAGE>
1.4 "Financing Agreements" shall mean, collectively, this Agreement, the
Term Note, the Pledge Agreement and all notes, guarantees, security agreements
and other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by Borrower pursuant hereto, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.5 "Distributions" shall mean any and all distributions of property of
any kind or type, including, but not limited to, distributions made with respect
to interests in partnerships, general or limited; dividends with respect to
stock (including the Restricted Stock), whether cash or non-cash; proceeds from,
and other distributions with respect to, options, including, but not limited to,
the Options and all similar instruments, including, but not limited to,
warrants, rights and similar interests, whether realized through the exercise
thereof or not; distributions with respect to operating partnership units,
including, but not limited to, the Units, whether obtained as a direct
distribution, realized on account of or in connection with a sale or other
transfer thereof, or as the same may be otherwise received.
1.6 "Material Adverse Effect" shall mean any event, occurrence or
circumstance which shall have the effect of materially and adversely affecting:
(i) the ability of Borrower to conduct his business in the ordinary course; or
(ii) the ability of Borrower to repay the Obligations as and when due.
1.7 "Loan" shall mean the loan made pursuant to, agreed to be made
pursuant to and/or evidenced hereby and by the other Financing Agreements.
1.8 INTENTIONALLY DELETED.
1.9 "Obligations" shall mean the Loan, and all other obligations,
liabilities and indebtedness of every kind, nature and description arising under
any of the Financing Agreements owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether now existing or hereafter arising, whether arising, during or
after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured.
1.10 "Options" shall mean any and all of the Options and related collateral
described on Exhibit A hereto.
1.11 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.12 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data, in each case, relating to the
Collateral, including but not limited to the Employment Agreement together with
the tapes, disks, diskettes and other data and software storage media and
devices, file cabinets or containers in or on which the foregoing are stored
(including any rights of Borrower with respect to the foregoing maintained with
or by any other person).
2
<PAGE>
1.13 "Rights to Payment" means accounts, accounts receivable and other
rights to payment including, but not limited to, rights to payment of every kind
or type inuring to the benefit of any person under the terms of the Units, the
Options or the Employment Agreement.
1.14 "Pledge Agreement" means that certain Borrower Pledge Agreement of
even date hereof between Borrower and Lender with respect to the Units,
Restricted Stock and the Options.
1.15 "Term Note" means that certain Term Promissory Note of even date
herewith evidencing the Loans.
1.16 "Unit" shall mean those certain Unit(s) described on Exhibit "B"
hereto.
1.17 "Restricted Stock" shall mean those certain shares of Restricted
Stock(s) described on Exhibit "B" hereto.
SECTION 2. CREDIT
------
2.1 Term Loan. Subject to, and upon the terms and conditions contained
---------
herein, Lender agrees to extend the Loan to Borrower in the aggregate principal
amount of Three Million One Hundred and Thirty-Eight Thousand Five Hundred and
Eighty-Six and NO/100 Dollars ($3,138,586.00).
2.2 INTENTIONALLY DELETED.
2.3 Conditions Precedent to the Loan. As a condition precedent to the
--------------------------------
Loan hereunder, (a) Borrower shall execute and deliver to Lender the Financing
Agreements in such form as Lender may require, including, but not limited to,
the Term Note, the Pledge Agreement and such Uniform Commercial Code Financing
Statements as Lender may deem appropriate, (b) all representations and
warranties contained herein and in all the other Financing Agreements shall be
true and (c) no Event of Default, or event which, with the passage of time, the
giving of notice or both, would constitute an Event of Default has occurred and
is continuing.
2.4 Payments.
--------
(a) The Obligations may be voluntarily prepaid in whole or in part, at
any time and from time to time, without premium or penalty.
(b) There shall be mandatory payments with respect to the Obligations
payable hereunder and under the Term Note, (i) in an amount equal to the
proceeds of sale of or other disposition of any of the Units or Restricted
Stock; (ii) in an amount equal to the net proceeds from the sale or other
disposition of any of the Options; (iii) in an amount equal to all other
Distributions received by or payable to Borrower; and (iv) as otherwise set
forth in the Term Note.
(c) Each payment required to be made pursuant to Section 2.4(b) above
shall be due and payable when the proceeds of any sale or disposition of Units
or Options, or any other Disposition, as the case may be, would have otherwise
been received by Borrower. Each payment required to be made under clause (v) of
Section 2.4(b) above shall be due and payable as set forth in the Term Note. All
payments shall be applied first to accrued and outstanding interest owing
hereunder and under the Term Note and then to any installments of principal
owing under the Term Note in inverse order of maturity.
3
<PAGE>
SECTION 3. INTEREST AND FEES
-----------------
3.1 Interest.
--------
(a) Borrower shall pay to Lender interest on the outstanding principal
balance of the Loan at the per annum rate of 7.445%.
(b) Interest shall accrue and shall be compounded quarterly in arrears on
the first day of each calendar quarter commencing with the quarter commencing
January 1, 1998. Interest payable hereunder shall be calculated on the basis of
a three hundred sixty-five (365) day year and actual days elapsed. In no event
shall charges constituting interest payable by Borrower to Lender exceed the
maximum amount or the rate permitted under any applicable law or regulation, and
if any part or provision of this Agreement is in contravention of any such law
or regulation, such part or provision shall be deemed amended to conform
thereto.
SECTION 4. GRANT OF SECURITY INTEREST
--------------------------
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in and a lien upon, and hereby
assigns to Lender as security, the following property and interests in property,
whether now owned or hereafter acquired or existing, and wherever located
(collectively, the "Collateral"):
4.1 Reserved;
4.2 all Units, Options, Restricted Stock and other "Pledged Collateral",
as defined in the Pledge Agreement;
4.3 Records; and
4.4 all products and proceeds of the foregoing, in any form.
SECTION 5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of the Loan by Lender
to Borrower:
5.1 Enforceability. This Agreement and the other Financing Agreements
--------------
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms, subject to the following qualifications:
(i) the effects of bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws affecting the rights and remedies of creditors
generally; (ii) the effects of general principles of equity, whether applied by
a court of law or equity, and (iii) any limitations under applicable law which
relate to the indemnification provisions of this Agreement.
5.2 INTENTIONALLY DELETED.
4
<PAGE>
5.3 Primary Domicile; Collateral Locations. The primary domicile of
--------------------------------------
Borrower is located at the address set forth at the end of this Agreement.
Borrower's records concerning accounts are located only at such office. Subject
to the right of Borrower to establish new locations in accordance with Section
6.1 below, Borrower has no other places of business or locations of collateral.
5.4 Priority of Liens; Title to Collateral. The security interests and
--------------------------------------
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral. Borrower has good and marketable title to the
Collateral.
5.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
-----------
manner all tax returns, reports and declarations which are required to be filed
by it (without requests for extension except as previously disclosed, in
writing, to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects and each year,
until the Loan has been paid in full, copies of each of such tax returns,
reports and declarations, in each case executed by Borrower and/or Borrower's
financial consultant, shall be delivered to Lender no later than such filings
are filed with the appropriate taxing authorities. There is no present
investigation by any governmental agency pending, or to the best of Borrower's
knowledge threatened, against or affecting Borrower, its assets or business and
there is no action, suit, proceeding or claim by any Person pending, or to the
best of Borrower's knowledge threatened, against Borrower or its assets or
goodwill, or against or affecting any transactions contemplated by this
Agreement.
5.6 Compliance with Other Agreements and Applicable Laws. Borrower is
----------------------------------------------------
not in default in any material respect under, or in violation in any material
respect of any of the terms of, any material agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound and Borrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local governmental authority the
failure to comply with which in each case, would have a Material Adverse Effect.
5.7 Accuracy and Completeness of Information. All information furnished
----------------------------------------
by or on behalf of Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading.
No event or circumstance has occurred which has had a Material Adverse Effect
which has not been fully and accurately disclosed to Lender in writing.
5.8 Survival of Warranties; Cumulative. All representations and
----------------------------------
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement. The representations
and warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which Borrower shall now or hereafter give, or
cause to be given, to Lender.
5
<PAGE>
SECTION 6. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
6.1 New Domicile. Borrower may change his principle domicile or place of
------------
residence within the continental United States provided Borrower (c) gives
Lender sixty (60) days prior written notice of the intended change and (d)
executes and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem reasonably necessary
or desirable to protect its interests in the Collateral at such location,
including, without limitation, Uniform Commercial Code financing statements.
6.2 Compliance with Laws, Regulations, Etc. Borrower shall, at all times,
--------------------------------------
comply in all material respects with all laws, rules, regulations, licenses,
permits, approvals and orders of any Federal, State or local governmental
authority applicable to it for which the failure to so comply would have a
Material Adverse Effect.
6.3 Financial Statements and Other Information. Borrower shall furnish
------------------------------------------
or cause to be furnished to Lender such information respecting the Collateral
and the business of Borrower as Lender may, from time to time reasonably request
until the Loans are paid in full, including but not limited to, copies of all of
Borrower's income tax returns required to be filed by Borrower under Federal or
state laws. Such tax returns shall be executed by Borrower and Borrower's tax
advisor, if any, and shall be submitted by Borrower to Lender prior to their
becoming delinquent, together with evidence, reasonably required by Lender,
showing that Borrower has actually paid the liabilities reflected in such
returns.
6.4 Restrictions on Dividends and Redemptions. Except as otherwise set
-----------------------------------------
forth herein, Borrower shall not, directly or indirectly, receive or retain any
Distributions on account of any Collateral, including, but not limited to, the
Pledged Collateral, now or hereafter outstanding.
6.5 Costs and Expenses. Borrower shall pay to Lender on demand all costs,
------------------
expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, closing, collection, liquidation, enforcement and
defense of the Obligations or Lender's rights in (i) the Collateral, (ii) this
Agreement or (iii) the other Financing Agreements, including any amendments,
supplements or consents which may hereafter be entered into in respect hereof
and thereof, including, but not limited to: (a) costs and expenses of preserving
and protecting the Collateral; and (b) costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the security
interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements; and (c) the fees and disbursements of counsel
(including legal assistants) to Lender in connection with any of the foregoing.
6.6 Further Assurances. At the reasonable request of Lender at any time
------------------
and from time to time, Borrower shall, at its expense, duly execute and deliver,
or cause to be duly executed and delivered, such further agreements, documents
and instruments, and do or cause to be done such further acts as may be
necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Where permitted by law, Borrower hereby authorizes Lender to
execute and file one or more UCC financing statements signed only by Lender.
6.7 Negative Pledge. Borrower shall, at all times while the Loan is
---------------
outstanding, keep all of the Collateral free and clear of all liens, claims and
encumbrances other than those in favor of Lender granted pursuant to the
Financing Agreements. Borrower shall also protect and defend Lender's interest
in the Collateral granted pursuant to the Financing Agreements or otherwise.
6
<PAGE>
6.8 Certain Board of Directors' Matters. Borrower currently sits on the
-----------------------------------
Board of Directors of AHP and serves as an executive officer thereof and of
AHPOP. Borrower covenants to abstain from any and all Board discussions and
votes concerning the stock dividend associated with AHP's stock.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
------------------------------
7.1 Events of Default. The occurrence or existence of any one or more of
-----------------
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Borrower fails to pay when due any of the Obligations;
(b) Borrower fails to perform any of the terms, covenants, conditions
or provisions contained in this Agreement or any of the other Financing
Agreements;
(c) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or other document delivered
to Lender by or on behalf of Borrower pursuant hereto shall, when delivered by
or on behalf of Borrower or, if applicable, as of the date as of which document
speaks, be false or misleading in a manner reasonably likely to have a Material
Adverse Effect;
(d) Borrower becomes insolvent (however defined or evidenced), makes
an assignment for the benefit of creditors, makes or sends notice of a bulk
transfer or calls a meeting of its creditors or principal creditors;
(e) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or all or any part of its properties and
such petition or application is not dismissed within ninety (90) days after the
date of its filing or Borrower shall file any answer admitting or not contesting
such petition or application or indicates its consent to, acquiescence in or
approval of, any such action or proceeding or the relief requested is granted
sooner;
(f) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or for all or any part of its property; or
(g) there shall be an Event of Default, withdrawal, cancellation or
other termination under any of the other Financing Agreements.
7.2 Remedies.
--------
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code as
enacted in the State of California and other applicable law, all of which rights
and remedies may be exercised without notice to or consent by Borrower, except
as such notice or consent is expressly provided for hereunder or required by
applicable law. All rights, remedies and powers granted to Lender hereunder,
under any of the other Financing Agreements, the Uniform
7
<PAGE>
Commercial Code as enacted in the State of California or other applicable law,
are cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
-------- ----
Event of Default described in Sections 7.1(e) and 7.1(f), all Obligations shall
automatically become immediately due and payable), (ii) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, and/or
(iii) terminate this Agreement. If notice of disposition of Collateral is
required by law, then Lender shall provide Borrower with such notice. In the
event Lender institutes an action to recover any Collateral or seeks recovery of
any Collateral by way of prejudgment remedy, Borrower waives the posting of any
bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, when due. Borrower shall remain liable to Lender for the
payment of any deficiency with interest at the highest rate provided for herein
and all costs and expenses of collection or enforcement, including attorneys'
fees and legal expenses.
SECTION 8. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
------------------------------------------------------------
8.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
---------------------------------------------------------------------
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the non-
exclusive jurisdiction of the Superior Court of the State of California for the
County of Los Angeles and the United States District Court for the Central
District of California and waive any objection based on venue or forum non
----- ---
conveniens with respect to any action instituted therein arising under this
- ----------
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Each party hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be
8
<PAGE>
completed five (5) days after the same shall have been so deposited in the U.S.
mails, or, at the option of the party sending the notice, by service upon the
recipient in any other manner provided under the rules of any such courts.
Within thirty (30) days after such service, Borrower shall appear in answer to
such process, failing which Borrower shall be deemed in default and judgment may
be entered by Lender against Borrower for the amount of the claim and other
relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless such losses were the result of acts or omissions
constituting negligence or willful misconduct by Lender.
8.2 Waiver of Notices. Borrower hereby expressly waives demand,
-----------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
8.3 Amendments and Waivers. Neither this Agreement nor any provision hereof
----------------------
shall be amended, modified, waived or discharged orally or by course of conduct,
but only by a written agreement signed by Lender and Borrower. Lender shall not,
by any act, delay, omission or otherwise be deemed to have expressly or
impliedly waived any of its rights, powers and/or remedies unless such waiver
shall be in writing and signed by Lender. Any such waiver shall be enforceable
only to the extent specifically set forth therein. A waiver by Lender of any
right, power and/or remedy on any one occasion shall not be construed as a bar
to or waiver of any such right, power and/or remedy which Lender would otherwise
have on any future occasion, whether similar in kind or otherwise.
9
<PAGE>
8.4 Indemnification.
---------------
(a) Borrower shall indemnify, defend and hold Lender, and its
successors, assigns and employees (collectively the "Lender Parties"), harmless
from and against any and all losses, claims, damages, liabilities, costs or
expenses (collectively, "Losses") imposed upon, incurred by or asserted against
any of the Lender Parties by any creditor of Borrower in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the enforcement, performance or administration of this Agreement, any other
Financing Agreement, any undertaking or proceeding relating to any of the
transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including, without limitation, amounts paid in
settlement, court costs, and the fees and expenses of counsel.
(b) Promptly after receipt by Borrower under this Section 8.4 of
notice of the commencement of any action, proceeding or investigation or the
assertion of any claim, if a claim in respect thereof is to be made against a
Lender Party, Borrower shall immediately notify all other persons potentially
liable under this Section 8.4 of the commencement thereof. In case such action
is brought against any party hereto and such party shall be entitled to
participate in, and to the extent that it may wish, to assume, the defense
thereof subject to the provisions herein stated, with counsel reasonably
satisfactory to such party, and after notice each other party with potential
liability under this Section 8.4 to such party of its election so to assume the
defense thereof, notwithstanding anything to the contrary contained herein, no
one shall not be liable under this Section 8.4 for any legal or other expenses
subsequently incurred by anyone else in connection with the defense thereof,
other than reasonable costs assuming such defense of investigation. All other
persons entitled to the benefit hereof shall have the same rights as each other
such person set forth in the immediately preceding sentence. The person
referred to immediately above shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of the person initially
undertaking the defense of such action if such person has assumed the defense of
the action with counsel reasonably satisfactory to the other person also subject
to the benefit of this Section 8.4.
(c) No settlement of any action against any party subject to the
benefit of this Section 8.4 shall be made without the consent of the person who
received the notice of claim referred to above and the party providing the
indemnity, which consent shall not be unreasonably withheld or delayed by any
person in light of all factors of importance to all parties shall not be liable
to indemnify any person for any settlement of any such claim accepted without
such person's consent.
(d) No one shall be liable for any Losses pursuant to this Section
8.4 to the extent such Losses resulted from the negligence or misconduct of such
person or its affiliates, successors or assigns or to the extent that such
Losses resulted from the material breach by a person entitled to the benefit
hereof or its affiliates, successors or assigns of any representation, warranty,
covenant or other agreement of such person contained in this Agreement.
(e) Each person entitled to the benefits of this Section 8.4 agrees
that if and to the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section 8.4 may be unenforceable because it violates
any law or public policy, the relevant person shall pay the maximum portion
which it is permitted to pay under applicable law to the appropriate person in
satisfaction of indemnified matters hereunder. If the relevant person is the
Borrower, the foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
10
<PAGE>
8.5 Representation as to Counsel Generally. Borrower acknowledges,
---------------------------------------
represents and warrants that he has: (a) been represented by and relied on
counsel of his own choosing with respect to this Agreement, the Term Note,
Pledge Agreement and the rest of the Financing Agreements and the transactions
evidenced and/or contemplated thereby; (b) he has read this Agreement and the
rest of the Financing Agreements and is fully aware of and understands all of
their respective terms and the consequences thereof; and (c) that, through his
counsel, he participated in the preparation of this Agreement and the other
Financing Agreements.
------------------------------------
F.W.B.
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
--------------------------------
9.1 Term.
----
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the earlier of (i) the maturity
date of the Term Note, whether through acceleration or otherwise, or (ii) the
date which is six months after Borrower is no longer employed by Lender,
Alexander Haagen Properties Operating Partnership, L.P. ("AHPOP"), or Haagen
Property Management, Inc. ("HPMI") or any of their successors and assigns).
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower or any Obligor of its respective
duties, obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Lender's continuing security interest in the Collateral and the rights
and remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid. In the event of such a termination,
interest shall continue to accrue and be payable on all outstanding Obligations
as set forth in Section 3 of this Agreement.
9.2 Notices. All notices, requests and demands hereunder shall be in
-------
writing and (a) made to Lender at its address set forth below and to Borrower at
its domicile set forth below, or to such other address as either party may
designate by written notice to the other in accordance with this provision, and
(b) be deemed to have been given or made: if delivered in person, immediately
upon delivery if such delivery is made on a business day, or, otherwise, on the
next following business day; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt if such transmission
is made on a business day or, otherwise, on the next following business day and
if by a nationally recognized overnight courier service with instructions to
deliver the next business day, one (1) business day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.
9.3 Partial Invalidity. If any provision of this Agreement is held to be
------------------
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
11
<PAGE>
9.4 Successors. Neither party may assign its rights under this
----------
Agreement, except that Lender may, after written notice to Borrower, assign its
rights and delegate its obligations under this Agreement to any affiliate of, or
other successor to, Lender, in which event, such affiliate or other successor
shall have, to the extent of such assignment or delegation, the same rights and
benefits as it would have if it were the Lender hereunder, except as otherwise
provided by the terms of such assignment or delegation.
9.5 Entire Agreement. This Agreement, the other Financing Agreements,
----------------
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered pursuant hereto or therewith represents the entire agreement and
understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
- --------------------------------------------------------------------------------
LENDER BORROWER
- ------ --------
ALEXANDER HAAGEN PROPERTIES FRED W. BRUNING
OPERATING PARTNERSHIP, L.P.,
a California limited partnership /s/ Fred W. Bruning
-------------------
By: Alexander Haagen Properties, Inc., Fred W. Bruning
A Maryland corporation Domicile:
2825 Via Sola
Palos Verdes,
By: /s/ Steven Jaffe California 90274
----------------------------------
Its: Senior VP
-----------------------------
Domicile or Principal Attention: Fred W. Bruning
Place of Business:
3500 Sepulveda Boulevard Telephone:
Manhattan Beach,
California 90216 Facsimile:
Attention: President
Telephone: 310/546-4520
Facsimile: 310/546-8249
- --------------------------------------------------------------------------------
12
<PAGE>
EXHIBIT A
TO LOAN AND SECURITY AGREEMENT
OPTIONS
A. Those certain incentive stock options and non-qualified stock options to
buy 55,000 shares of Common Stock of Alexander Haagen Properties, Inc.,
pursuant to the Amended and Restated 1993 Stock Option and Incentive Plan
("Plan") for Officers, Directors and Key Employees of Alexander Haagen
Properties, Inc., Alexander Haagen Properties Operating Partnership, L.P.,
and Haagen Property Management, Inc. Such options are exercisable in
annual increments of 13,750 shares commencing on December 28, 1994, at an
exercise price of $18.00 per share.
B. Those certain incentive stock options and non-qualified stock options to
buy 27,500 shares of Common Stock of Alexander Haagen Properties, Inc.,
granted in August, 1995. Such options are exercisable in annual increments
of 6,875 shares commencing in August, 1996, at an exercise price of
$11.625.
C. Those certain incentive stock options to buy 100,000 shares of Common Stock
of Alexander Haagen Properties, Inc., granted in May, 1997. Such options
are exercisable subject to certain vesting requirements at an exercise
price of $15.00.
13
<PAGE>
EXHIBIT B
TO LOAN AND SECURITY AGREEMENT
UNITS
A. Those certain 255,666 Operating Partnership Units issued as of February 1,
1997, evidenced by Certificate No. 31.
B. Those certain 6,667 Operating Partnership Units issued on December 27, 1993
evidenced by Certificate No. 1007.
Restricted Stock
A. Those certain 5,000 shares of Restricted Stock issued on February 27, 1997
evidenced by Stock Certificate No. 8204.
14
<PAGE>
EXHIBIT 10.36
================================================================================
[LOGO OF CHASE MANHATTAN BANK] 1
CREDIT AGREEMENT
dated as of
December 31, 1997
among
ALEXANDER HAAGEN PROPERTIES
OPERATING PARTNERSHIP, L.P.
as Borrower
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
___________________________
CHASE SECURITIES INC.,
as Arranger
CREDIT LYONNAIS, NEW YORK BRANCH,
as Syndication Agent
and
CIBC INC.
as Documentation Agent
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms....................................... 2
SECTION 1.02. Classification of Loans and Borrowings.............. 30
SECTION 1.03. Terms Generally..................................... 30
SECTION 1.04. Accounting Terms; GAAP.............................. 31
ARTICLE II
The Credits; Conversion to Unsecured
------------------------------------
SECTION 2.01. Commitments......................................... 31
SECTION 2.02. Loans and Borrowings................................ 31
SECTION 2.03. Requests for Borrowings............................. 32
SECTION 2.04. Intentionally Deleted............................... 32
SECTION 2.05. Intentionally Deleted............................... 32
SECTION 2.06. Letters of Credit................................... 33
SECTION 2.07. Funding of Borrowings............................... 36
SECTION 2.08. Interest Elections.................................. 37
SECTION 2.09. Termination and Reduction of Commitments............ 38
SECTION 2.10. Repayment of Loans; Evidence of Debt................ 39
SECTION 2.11. Prepayment of Loans; Release of Mortgaged
Property/Subsidiary Guaranty..................... 39
SECTION 2.12. Fees................................................ 41
SECTION 2.13. Interest............................................ 42
SECTION 2.14. Alternate Rate of Interest.......................... 43
SECTION 2.15. Increased Costs..................................... 43
SECTION 2.16. Break Funding Payments.............................. 44
SECTION 2.17. Taxes............................................... 45
SECTION 2.18. Payments Generally; Pro Rata
Treatment; Sharing of Set-offs................... 46
SECTION 2.19. Mitigation Obligations; Replacement of Lenders...... 48
SECTION 2.20. Conversion to Unsecured Facility.................... 48
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Organization; Powers................................ 49
SECTION 3.02. Authorization; Enforceability....................... 49
SECTION 3.03. Governmental Approvals; No Conflicts................ 49
SECTION 3.04. Financial Condition; No Material Adverse Change..... 50
SECTION 3.05. Properties.......................................... 50
SECTION 3.06. Litigation and Environmental Matters................ 52
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.07. Compliance with Laws and Agreements................ 54
SECTION 3.08. Investment and Holding Company Status.............. 54
SECTION 3.09. Taxes.............................................. 54
SECTION 3.10. ERISA.............................................. 54
SECTION 3.11. Disclosure......................................... 55
SECTION 3.12. Insurance.......................................... 55
SECTION 3.13. REIT Status........................................ 55
SECTION 3.14. Ownership of Projects, Minority Holdings and
Property....................................... 55
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date..................................... 55
SECTION 4.02. Each Credit Event.................................. 58
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.01. Financial Statements and Other Information......... 59
SECTION 5.02. Notices of Material Events......................... 61
SECTION 5.03. Existence; Conduct of Business..................... 64
SECTION 5.04. Payment of Obligations............................. 64
SECTION 5.05. Maintenance of Properties; Insurance............... 64
SECTION 5.06. Books and Records; Inspection Rights............... 64
SECTION 5.07. Compliance with Laws............................... 64
SECTION 5.08. Use of Proceeds and Letters of Credit.............. 65
SECTION 5.09. Company Status..................................... 65
SECTION 5.10. Ownership of Projects, Minority Holdings and
Property....................................... 65
SECTION 5.11. Intentionally Deleted.............................. 65
SECTION 5.12. Environmental Matters.............................. 65
SECTION 5.13. Borrowing Base Determination/ Requirements......... 66
SECTION 5.14. Equity Infusion Requirement........................ 68
ARTICLE VI
Negative Covenants
------------------
SECTION 6.01. Indebtedness and Other Financial Covenants......... 68
SECTION 6.02. Liens.............................................. 70
SECTION 6.03. Fundamental Changes................................ 70
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions................................... 71
SECTION 6.05. Hedging Agreements................................. 71
SECTION 6.06. Transactions with Affiliates....................... 72
SECTION 6.07. Intentionally Deleted.............................. 72
SECTION 6.08. Margin Regulations; Securities Laws................ 72
SECTION 6.09. Negative Covenants of the Company.................. 72
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.10. Environmental Matters.............................. 72
ARTICLE VII
Events of Default
-----------------
ARTICLE VIII
The Administrative Agent
------------------------
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices............................................ 78
SECTION 9.02. Waivers; Amendments................................ 78
SECTION 9.03. Expenses; Indemnity; Damage Waiver................. 79
SECTION 9.04. Successors and Assigns............................. 81
SECTION 9.05. Survival........................................... 83
SECTION 9.06. Counterparts; Integration; Effectiveness........... 83
SECTION 9.07. Severability....................................... 83
SECTION 9.08. Right of Set-off................................... 84
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
Process........................................ 84
SECTION 9.10. Waiver of Jury Trial............................... 84
SECTION 9.11. Headings........................................... 85
SECTION 9.12. Confidentiality.................................... 85
SECTION 9.13. Interest Rate Limitation........................... 86
</TABLE>
<PAGE>
SCHEDULES:
Schedule 2.01 -- Commitments
Schedule 3.02(b) -- Ownership Structure
Schedule 3.04 -- Existing Indebtedness
Schedule 3.05(a) -- Real Property
Schedule 3.05(b) -- Leased Properties
Schedule 3.06 -- Disclosed Matters
Schedule 3.12 -- Insurance
Schedule 5.13 -- Initial Mortgaged Properties
EXHIBITS:
Exhibit A -- Form of Note
Exhibit B -- Form of Assignment and Acceptance
Exhibit C -- Form of Borrowing Base Certificate
Exhibit D -- Form of Compliance Certificate
Exhibit E -- Form of Opinion of Borrower's Counsel
Exhibit F -- Form of Subordination and Attornment Agreement
Exhibit G -- Form of Subsidiary Guaranty
Exhibit H -- Form of Letter Agreement
Exhibit I -- Form of Due Diligence Request Form
Exhibit J -- Approved Environmental Consultants List
Exhibit K -- Scope of Work Requirements
Exhibit L -- Form of Reliance Letter
<PAGE>
CREDIT AGREEMENT dated as of December 31, 1997 among ALEXANDER
HAAGEN PROPERTIES OPERATING PARTNERSHIP, L.P., as Borrower, the LENDERS party
hereto, and THE CHASE MANHATTAN BANK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms. As used in this Agreement, the
-------------
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
---
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Adjusted EBITDA" means, for any Person, for any period, (i)
---------------
EBITDA for such person, for such period, as adjusted to eliminate the straight-
lining of rents, less (ii) the Capital Expenditure Deduction Amount for such
----
Person's Projects for such period.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
------------------
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Adjusted NOI" means, for any period, (a) with respect to any
------------
Project owned by the Consolidated Businesses, the NOI relating to such Project
for such period less (i) the Capital Expenditure Reserve Amount relating to such
----
Project, and (ii) a management fee of three percent (3%) of gross revenues from
such Project; and (b) with respect to any Project owned by a Minority Holding,
the portion allocable to the Borrower, in accordance with GAAP, of the NOI
relating to such Project for such period less (i) the Capital Expenditure
----
Reserve Amount relating to such Project, and (ii) a management fee of three
percent (3%) of gross revenues from such Project, in each case for such period.
"Administrative Agent" means The Chase Manhattan Bank, in its
--------------------
capacity as administrative agent for the Lenders hereunder, and any successor
thereto under this Agreement.
"Administrative Questionnaire" means an Administrative
----------------------------
Questionnaire in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another
---------
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Aggregate Value" means, (a) at any time prior to the Conversion
---------------
Date, with
2
<PAGE>
respect to the Mortgaged Properties, at any date, the aggregate value thereof to
be calculated as follows:
(i) with respect to Mortgaged Properties owned for not less
than four (4) fiscal quarters, as of the first day of each fiscal quarter
for the immediately preceding consecutive four (4) fiscal quarters, an
amount equal to Adjusted NOI relating to such Mortgaged Properties for such
period divided by 9.5%;
------- --
(ii) with respect to Mortgaged Properties owned for less than
four (4) fiscal quarters, an amount equal to the Appraised Value for such
Mortgaged Properties; and
(b) at any time from and after the Conversion Date, at any date, the
aggregate value of all Eligible Projects to be calculated as follows:
(i) with respect to Eligible Projects owned for not less than four
(4) fiscal quarters, as of the first day of each fiscal quarter for the
immediately preceding consecutive four (4) fiscal quarters, an amount equal to
Adjusted NOI relating to such Eligible Projects for such period divided by 9.5%;
------- --
(ii) with respect to Eligible Projects owned for less than four (4)
fiscal quarters, an amount equal to Borrower's Investment in such Eligible
Project;
provided that, in no event shall more than ten percent (10%) of the Aggregate
- -------- ----
Value at any time be attributable to Eligible Projects owned by Eligible
Minority Holdings.
"Agreement" means this Credit Agreement, together with all Exhibits and
---------
Schedules hereto, as the same may be further amended, supplemented or otherwise
modified from time to time.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
-------------------
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any Lender, the
---------------------
percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Applicable Rate" means, (a) for any day prior to the Conversion Date,
---------------
(i) with respect to any ABR Loan, 0.0%, and (ii) with respect to any Eurodollar
Loan, (A) to the extent the outstanding balances of all Loans do not exceed the
Outstanding Equity Infusion, and provided the Administrative Agent shall not
have received a Notice of Breach, 1.00%, and (B) to the extent the outstanding
balances of all Loans do exceed the Outstanding Equity Infusion, or in
3
<PAGE>
the event that the Administrative Agent shall have received a Notice of Breach,
until the default referred to therein has been cured or waived, 1.375%; or
(b) for any day commencing on and after the Conversion Date, with
respect to any ABR Loan, or Eurodollar Loan, as the case may be, the applicable
rate per annum set forth below under the caption "ABR Spread" or "Eurodollar
Spread", as the case may be, based upon either:
(i) the range into which the Leverage Ratio then falls in
accordance with the following tables. Any change in the applicable Rate
shall be effective as of the financial reporting dates set forth in Section
5.01 hereof or as of the date of any Borrowing on which the Leverage Ratio
changes:
<TABLE>
<CAPTION>
Leverage Ratio ABR Spread Eurodollar Spread
-------------- ---------- -----------------
<S> <C> <C>
less than 35% 0.0% 1.15%
35%- 45% 0.0% 1.25%
greater than 45% 0.0% 1.375%
</TABLE>
; or
(ii) if either S&P or Moody's shall have in effect a rating for the
Index Debt (other than by reason of the circumstances referred to in the
last sentence of this definition), the ratings by S&P and Moody's,
respectively, applicable on such date to the Index Debt:
<TABLE>
<CAPTION>
============================================================
ABR Eurodollar
--- ----------
Index Debt Ratings: Spread Spread
------------------ ------ ------
------------------------------------------------------------
<S> <C> <C>
Category 1
-----------
A-/A3 or better 0.0% 0.75%
------------------------------------------------------------
Category 2
----------
BBB+/Baa1 0.0% 0.90%
------------------------------------------------------------
Category 3
----------
BBB/Baa2 0.0% 1.05%
------------------------------------------------------------
Category 4
----------
BBB-/Baa3 0.0% 1.15%
============================================================
</TABLE>
For purposes of the foregoing, (A) if the ratings established or
deemed to have been established by S&P and Moody's for the Index Debt shall fall
within different Categories, the Applicable Rate shall be based on the higher of
the two ratings unless one of the two ratings
4
<PAGE>
is two or more Categories lower than the other, in which case the Applicable
Rate shall be determined by reference to the Category next below that of the
higher of the two ratings; and (B) if the ratings established or deemed to have
been established by S&P and Moody's for the Index Debt shall be changed (other
than as a result of a change in the rating system of S&P or Moody's), such
change shall be effective as of the date on which it is first announced by the
applicable rating agency. Each change in the Applicable Rate shall apply during
the period commencing on the effective date of such change and ending on the
date immediately preceding the effective date of the next such change. If the
rating system of S&P and Moody's shall change, or if either such rating agency
shall cease to be in the business of rating corporate debt obligations, the
Borrower and the Lenders shall negotiate in good faith to amend this definition
to reflect such changed rating system or the unavailability of ratings from such
rating agency and, pending the effectiveness of any such amendment, the
Applicable Rate shall be determined by reference to the rating most recently in
effect prior to such change or cessation.
"Appraisal" means an MAI appraisal in compliance with FIRREA using
---------
methodologies reasonably acceptable to the Administrative Agent at the time
such appraisal is or was made and performed by a qualified and recognized
professional appraiser as may be selected or approved by the Administrative
Agent, having at least ten (10) years' prior experience in performing real
estate appraisals in the geographic area where the property being appraised is
located, having a recognized expertise in appraising properties operated as
retail shopping centers.
"Appraised Value" means, with respect to any Eligible Project, the
---------------
fair market value therefor as determined by and set forth in the Appraisal
relating thereto.
"Assessment Rate" means, for any day, the annual assessment rate in
---------------
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; provided that if, as a result of
-------- ----
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of EXHIBIT B or any other form approved by the Administrative Agent.
---------
"Assignment of Leases" means the Assignment of Leases and Rents
--------------------
Agreement between the Administrative Agent and the Borrower.
"Availability Period" means the period from and including the Effective
-------------------
Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"Available Credit" means, at any time, an amount equal to (i) the lower
----------------
of (A)
5
<PAGE>
the then effective Commitments of the Lenders, and (B) the applicable Borrowing
Base at such time, minus (ii) the total Credit Exposure of all the Lenders at
-----
such time.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
------------
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States of America.
"Borrower" means Alexander Haagen Properties Operating Partnership,
--------
L.P., a California limited partnership.
"Borrower's Investment" means, with respect to any Project, the
---------------------
Borrower's or any of its Subsidiaries' investment in such Project (including all
investments constituting, evidencing or secured by an interest in property,
whether tangible or intangible and whether real, personal or mixed, that is used
or intended for use in, or in any manner connected with or relating to, the
ownership or leasing of such Project, specifically including, without
limitation, investments in Subsidiaries and Minority Holdings owning or leasing
Projects), at cost, on a consolidated basis, provided that in determining the
-------- ----
cost of such investments, there shall be included (i) the amount of all cash
paid and the value (as reasonably determined by the Company for purposes of such
investment) of any other property transferred therefor by the Borrower or its
Subsidiary, (ii) the amount of all Indebtedness and other obligations assumed or
incurred by the Borrower or its Subsidiary or to which the Borrower or its
Subsidiary takes subject, and (iii) the value (as determined by the Company for
the purposes of such investment) of all equity securities of which the issuer is
an entity that is, or upon such investment will be, included within the Borrower
or its Subsidiary and which are issued (otherwise than for cash) to, or retained
by, any person other than the Borrower or its Subsidiary in connection with such
investment.
"Borrowing" means Loans of the same Type, made, converted or continued
---------
on the same date and, in the case of Eurodollar Loans, as to which a single
Interest Period is in effect.
"Borrowing Base" means, subject to Section 5.13, (a) at any time prior
--------------
to the Conversion Date, 65% of the Aggregate Value of the Mortgaged Properties
at such time, and (b) at any time from and after the Conversion Date, the lower
of (i) 65% of the Aggregate Value of Eligible Projects at such time less
----
Unsecured Indebtedness (other than the Obligations), and (ii) 55% of the
Aggregate Value of Eligible Projects at such time, less Senior Unsecured
----
Indebtedness (other than the Obligations).
"Borrowing Base Certificate" means a certificate of the Borrower
--------------------------
substantially in the form of EXHIBIT C.
---------
"Borrowing Base Imbalance" has the meaning assigned to such term in
------------------------
Section 2.11(d) hereof.
"Borrowing Request" means a request by the Borrower for a Borrowing in
-----------------
accordance with Section 2.03.
6
<PAGE>
"Business Day" means any day that is not a Saturday, Sunday or other
------------
day on which commercial banks in New York City, New York, are authorized or
required by law to remain closed; provided that, when used in connection with a
-------- ----
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
------------
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Expenditure Deduction Amounts" means, for any Project, the
-------------------------------------
greater of (i) the sum of (a) an amount per annum equal to $0.30 multiplied by
the number of square feet for such Project and (ii) as of the first day of each
calendar quarter, an amount equal to the actual Capital Expenditures for such
Project for the immediately preceding consecutive four calendar quarters.
"Capital Expenditures" means, for any period, the aggregate of all
--------------------
expenditures (whether payable in cash or other Property or accrued as a
liability (but without duplication) during such period that, in conformity with
GAAP, are required to be included in or reflected by the Company's, the
Borrower's or any of its Subsidiaries' fixed asset accounts as reflected in any
of their respective balance sheets; provided, however, Capital Expenditures
-------- -------
shall include the sum of all expenditures by the Consolidated Businesses and the
portion of expenditures of Minority Holdings allocable to the Consolidated
Businesses for tenant improvements, leasing commissions, property level capital
expenditures (e.g., roof replacement, parking lot repairs, etc.) but not capital
expenditures in connection with expansions and initial developments and initial
lease-up of Projects.
"Capital Lease Obligations" of any Person means the obligations of such
-------------------------
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Cash and Cash Equivalents" means unrestricted (i) cash, (ii)
-------------------------
marketable direct obligations issued or unconditionally guaranteed by the United
States government and backed by the full faith and credit of the United States
government; and (iii) domestic and Eurodollar certificates of deposit and time
deposits, bankers' acceptances and floating rate certificates of deposit issued
by any commercial bank organized under the laws of the United States, any state
thereof, the District of Columbia, any foreign bank, or its branches or agencies
(fully protected against currency fluctuations), which, at the time of
acquisition, are rated A-1 (or better) by S&P or P-1 (or better) by Moody's
provided that such Cash and Cash Equivalents shall mature within one year of the
- -------- ----
acquisition thereof.
"Change in Control" means (a) the acquisition of ownership, directly or
-----------------
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof) other than
Prometheus, of shares representing more than 25% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of the
Company; (b) occupation of a majority of the seats (other than vacant seats) on
the board of
7
<PAGE>
directors of the Company by Persons who were neither (i) nominated by the board
of directors of the Company nor (ii) appointed by directors so nominated; or (c)
the acquisition of direct or indirect Control of the Borrower or the Company by
any Person or group other than Prometheus.
"Change in Law" means (a) the adoption of any law, rule or regulation
-------------
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral" means all property and interests in property and proceeds
----------
thereof now owned or hereafter acquired by the Borrower or any of its
Subsidiaries in or upon which a Lien is granted under any of the Collateral
Documents.
"Collateral Documents" means, collectively, the Mortgages, the
--------------------
Assignments of Leases, the Environmental Indemnities, the Subordination and
Attornment Agreements and any other document now or hereafter executed and
delivered by Borrower or any of its Subsidiaries granting a Lien on any of its
property to secure payment of the Obligations.
"Combined Equity Value" means Total Value less Total Outstanding
---------------------
Indebtedness.
"Commitment" means, with respect to each Lender, the commitment of such
----------
Lender to make Loans and to acquire participations in Letters of Credit
hereunder, expressed as an amount representing the maximum aggregate amount of
such Lender's Credit Exposure hereunder, as such commitment may be (a) reduced
from time to time pursuant to Section 2.09 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
9.04. The initial amount of each Lender's Commitment is set forth on Schedule
--------
2.01, or in the Assignment and Acceptance pursuant to which such Lender shall
- ----
have assumed its Commitment, as applicable. The aggregate amount of the Lenders'
Commitments is $250,000,000.00.
"Company" means Alexander Haagen Properties, Inc., a Maryland
-------
corporation.
"Compliance Certificate" means a certificate of the Borrower
----------------------
substantially in the form of EXHIBIT D.
---------
"Consolidated Businesses" means the Company, the Borrower and their
-----------------------
wholly-owned Subsidiaries.
"Contingent Obligation" as to any Person means, without duplication,
---------------------
(i) any contingent obligation of such Person required to be shown on such
Person's balance sheet in
8
<PAGE>
accordance with GAAP, and (ii) any obligation required to be disclosed in the
footnotes to such Person's financial statements in accordance with GAAP,
guaranteeing partially or in whole any non-recourse Indebtedness, lease,
dividend or other obligation, exclusive of contractual indemnities (including,
without limitation, any indemnity or price-adjustment provision relating to the
purchase or sale of securities or other assets) and guarantees of non-monetary
obligations (other than guarantees of completion) which have not yet been called
on or quantified, of such Person or of any other Person. The amount of any
Contingent Obligation described in clause (ii) shall be deemed to be (a) with
respect to a guaranty of interest or interest and principal, or operating income
guaranty, the sum of all payments required to be made thereunder (which in the
case of an operating income guaranty shall be deemed to be equal to the debt
service for the note secured thereby), calculated at the interest rate
applicable to such Indebtedness, through (i) in the case of an interest or
interest and principal guaranty, the stated date of maturity of the obligation
(and commencing on the date interest could first be payable thereunder), or (ii)
in the case of an operating income guaranty, the date through which such
guaranty will remain in effect, and (b) with respect to all guarantees not
covered by the preceding clause (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such guaranty
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as recorded on the balance sheet and on the footnotes to the most
recent financial statements of the applicable Borrower required to be delivered
pursuant hereto. Notwithstanding anything contained herein to the contrary,
guarantees of completion shall not be deemed to be Contingent Obligations unless
and until a claim for payment has been made thereunder, at which time any such
guaranty of completion shall be deemed to be a Contingent Obligation in an
amount equal to any such claim. Subject to the preceding sentence, (i) in the
case of a joint and several guaranty given by such Person and another Person
(but only to the extent such guaranty is recourse, directly or indirectly to the
applicable Borrower), the amount of the guaranty shall be deemed to be 100%
thereof unless and only to the extent that (X) such other Person has delivered
Cash and Cash Equivalents to secure all or any part of such Person's guaranteed
obligations or (Y) such other Person holds an Investment Grade Credit Rating
from either Moody's or S&P, and (ii) in the case of a guaranty, (whether or not
joint and several) of an obligation otherwise constituting Indebtedness of such
Person, the amount of such guaranty shall be deemed to be only that amount in
excess of the amount of the obligation constituting Indebtedness of such Person.
Notwithstanding anything contained herein to the contrary, "Contingent
Obligations" shall not be deemed to include (i) guarantees of loan commitments
or of construction loans to the extent the same have not been drawn, or (ii) any
obligations of the Borrower or the Company under the Haagen Agreement.
"Control" means the possession, directly or indirectly, of the power to
-------
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
----------- ---------
"Conversion Date" has the meaning assigned to such term in Section 2.20
---------------
hereof.
"Credit Exposure" means, with respect to any Lender at any time, the
---------------
sum of the outstanding principal amount of such Lender's Loans and its LC
Exposure at such time.
9
<PAGE>
"Default" means any event or condition which constitutes an Event of
-------
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
-----------------
environmental matters disclosed in Schedule 3.06.
"dollars" or "$" refers to lawful money of the United States of
------- -
America.
"EBITDA" means, for any Person for any period, the Net Income (Loss) of
------
such Person for such period taken as a single accounting period, plus (a) the
----
sum of the following amounts of such Person and its subsidiaries for such period
determined on a consolidated basis in conformity with GAAP to the extent
included in the determination of such Net Income (Loss): (i) depreciation
expense, (ii) amortization expense and other non-cash charges, (iii) interest
expense, (iv) income tax expense, (v) extraordinary losses (and other losses on
asset sales not otherwise included in extraordinary losses determined on a
consolidated basis in conformity with GAAP), and (vi) minority interests in
Unconsolidated Entities, less (b) the sum of the following amounts of such
----
Person and its subsidiaries determined on a consolidated basis in conformity
with GAAP to the extent included in the determination of such Net Income (Loss):
(i) extraordinary gains (and in the case of the Borrower, other gains on asset
sales not otherwise included in extraordinary gains determined on a consolidated
basis in conformity with GAAP), (ii) the applicable share of Net Income (Loss)
of such Person's Unconsolidated Entities; plus (c) the portion allocable to such
----
Person of EBITDA of such Person's Unconsolidated Entities.
"Effective Date" means the date on which the conditions specified in
--------------
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"Eligible Minority Holdings" means Minority Holdings in which (i) the
--------------------------
Company, the Borrower and/or any of its direct or indirect wholly-owned
Subsidiaries collectively have an ownership and/or income interest of greater
than fifty percent (50%), (ii) the Company, the Borrower and/or any of its
direct or indirect wholly-owned Subsidiaries control the management of such
Minority Holdings, whether as the general partner or managing member of such
Minority Holding, or otherwise, (iii) the Company, the Borrower and/or any of
its direct or indirect wholly-owned Subsidiaries, as general partner, managing
member or otherwise, has the ability, in its sole discretion, to grant Liens on
the assets of such Minority Holding, and (iv) there are no restrictions on the
ability of such Minority Holding to declare distributions or dividends, as the
case may be. As used in this definition only, the term "control" shall mean the
authority to make major management decisions in its sole discretion and the
management.
"Eligible Project Documents" means, with respect to any Eligible
--------------------------
Project, the following documents:
(a) A description of such Project, such description to include the age
and location of such Project together with a current rent roll therefor;
10
<PAGE>
(b) A copy of the most recent ALTA Owner's Policy of Title Insurance
(or commitment to issue such a policy to the Borrower or its Subsidiary or
Eligible Minority Holding owning or to own such Project) relating to such
Project showing the identity of the fee titleholder thereto and all matters
of record as of its date;
(c) A PML study for such Project prepared by a consultant acceptable
to the Administrative Agent;
(d) Copies of all engineering, mechanical, structural and maintenance
studies performed by third party consultants with respect to such Project;
(e) A "Phase I" environmental assessment of such Project prepared by
an environmental engineering firm acceptable to the Administrative Agent,
and any additional environmental studies or assessments available to the
Borrower performed with respect to such Project;
(f) A Borrowing Base Certificate setting forth on a pro forma basis
the Borrowing Base and the Available Credit assuming that such Project is
accepted as an Eligible Project for the purposes of the Borrowing Base; and
(g) Such other information as the Administrative Agent may reasonably
request in order to evaluate the Project;
provided that with respect to any Project, the Required Lenders may waive
- -------- ----
delivery of any of the Eligible Project Documents.
"Eligible Projects" means, collectively, such of the Projects owned by
-----------------
the Borrower or any of its direct or indirect wholly-owned Subsidiaries or, from
and after the Conversion Date only, by any Eligible Minority Holding, as shall
either (i) be approved by the Required Lenders or (ii) meet at any time and from
time to time, each of the following minimum criteria:
(a) such Project is Unencumbered;
(b) such Project is free of all material structural and title defects
other than Permitted Encumbrances;
(c) such Project is, as of the date upon which such Project is
included in the Aggregate Value and as of the end of each succeeding fiscal
quarter, (i) in compliance, in all material respects, with all applicable
Environmental Laws, and (ii) not subject to any material Environmental
Liabilities and Costs, in each case (y) prior to the Conversion Date, as
initially verified by a written report of an environmental consultant
reasonably acceptable to the Administrative Agent, and (z) from and after
the Conversion Date, as represented by the Borrower in accordance with
Section 5.13 hereof;
11
<PAGE>
(d) such Project is an unenclosed, anchored neighborhood shopping
center or power center, provided that (i) the provisions of this clause (d)
-------- ----
shall not be required for the Smitty's Tucson Project, and (ii) the Media
City Center Project may be enclosed;
(e) such Project is owned in fee simple by the Borrower or its direct
or indirect wholly-owned Subsidiary or, from and after the Conversion Date
only, by any Eligible Minority Holding, provided that the Media City Center
-------- ----
Project may be included as an Eligible Project notwithstanding that
Borrower owns only a ground leasehold interest therein;
(f) such Project has, as of the date upon which such Project is
included in the Aggregate Value and as of the end of each succeeding fiscal
quarter, a PML of less than 20% of the replacement cost therefor, in each
case (y) prior to the Conversion Date, as initially verified by a PML study
prepared by a consultant reasonably acceptable to the Administrative Agent,
and (z) from and after the Conversion Date, as represented by the Borrower
in accordance with Section 5.13 hereof; and
(g) such Project is located in one of the following states:
Washington, California, Oregon, Arizona, Nevada, Utah or Idaho.
provided that, for the purposes of Section 5.13(b) hereof from and after the
- -------- ----
Conversion Date, the Borrower shall only be required to deliver to the
Administrative Agent the documents specified in clauses (b), (c), (d) and (e) of
the definition of Eligible Project Documents to the extent the same are
available to the Borrower for any Project and the Borrower may, in lieu of
delivering such documents make a representation in respect of such Project in
the Borrowing Base Certificate delivered pursuant to clause (f) of the
definition of Eligible Project Documents, that such Project complies with the
requirements for an Eligible Project as set forth herein.
"Environmental Claim" means any notice of violation, action, claim,
-------------------
Environmental Lien, demand, abatement or other Order or direction (conditional
or otherwise) by any Governmental Authority or any other Person for personal
injury (including sickness, disease or death), tangible or intangible property
damage, damage to the environment, nuisance, pollution, contamination or other
adverse effects on the environment, or for fines, penalties or restriction,
resulting from or based upon (i) the existence, or the continuation of the
existence, of a Release (including, without limitation, sudden or non-sudden
accidental or non-accidental Releases) of, or exposure to, any Hazardous
Material or odor, audible noise or other nuisance, or other Release in, into or
onto the environment (including, without limitation, the air, soil, surface
water or groundwater) at, in, by, from or related to any property owned,
operated or leased by the Borrower or any of its Subsidiaries or any activities
or operations thereof; (ii) the environmental aspects of the transportation,
storage, treatment or disposal of Hazardous Materials in connection with any
property owned, operated or leased by the Borrower or any of its Subsidiaries or
their operations or facilities; or (iii) the violation, or alleged violation, of
any Environmental Laws, Orders or Environmental Permits of or from any
Governmental Authority relating to environmental matters connected with any
property owned, leased or operated by the Borrower or any of its Subsidiaries.
"Environmental Indemnity" means the Joint and Several Hazardous
-----------------------
Material
12
<PAGE>
Guaranty and Indemnification Agreement between the Administrative Agent, the
Borrower, and the Guarantor (as defined therein).
"Environmental Laws" means any applicable federal, state, local or
------------------
foreign law (including common law), statute, code, ordinance, rule, regulation
or other requirement having the force or effect of law relating to the
environment, natural resources, or public or employee health and safety and
includes, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C. (S) 9601 et seq., the
-- ---
Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et seq., the Federal
-- ---
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. (S) 136 et seq., the
-- ---
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. (S) 6901 et seq., the
-- ---
Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., the Clean Air Act, 42
-- ---
U.S.C. (S) 7401 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the
-- --- -- ---
Occupational Safety and Health Act, 29 U.S.C. (S) 651 et seq. (to the extent the
-- ---
same relates to any Hazardous Materials), and the Oil Pollution Act of 1990, 33
U.S.C. (S) 2701 et seq., as such laws have been amended or supplemented, and the
-- ---
regulations promulgated pursuant thereto, and all analogous state and local
statutes.
"Environmental Liabilities and Costs" means, as to any Person, all
-----------------------------------
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all reasonable fees, disbursements and expenses
of counsel, experts and consultants and costs of investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
claim or demand by any other Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute, including,
without limitation, any thereof arising under any Environmental Law,
Environmental Permit, order or agreement with any Governmental Authority or
other Person, and which relate to any environmental, health or safety condition,
or a Release or threatened Release, and result from the past, present or future
operations of, or ownership of property by, such Person or any of its
Subsidiaries or Eligible Minority Holdings.
"Environmental Lien" means any Lien in favor of any Governmental
------------------
Authority arising under any Environmental Law.
"Environmental Permit" means any Permit required under any applicable
--------------------
Environmental Laws or Order and all supporting documents associated therewith.
"Equity Infusion" has the meaning assigned to such term in the
---------------
Security Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
13
<PAGE>
"ERISA Event" means (a) any "reportable event", as defined in Section
-----------
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
----------
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article
----------------
VII.
"Excluded Taxes" means, with respect to the Administrative Agent, any
--------------
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.19(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.17(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.17(a).
"Facility Interest Expense" means, for any period, the interest
-------------------------
expense of the Borrower (whether paid, accrued or capitalized) with respect to
the Loans or LC Disbursements, calculated at the greater of (i) the actual
interest rate provided for herein, and (ii) an annual interest rate of 7.5%.
"FAD" means "funds available for distribution" and shall mean, for any
---
period, FFO, as adjusted to eliminate the straight-lining of rents, less Capital
Expenditures, for such period, whether payable or accrued as a liability.
14
<PAGE>
"Federal Funds Effective Rate" means, for any day, the weighted
----------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"FFO" means "funds from operations" as defined in the National
---
Association of Real Estate Investment Trusts ("NAREIT") White Paper on Funds
------
From Operations as approved by the NAREIT Board of Governors on March 3, 1995.
"Financial Officer" means the chief financial officer, principal
-----------------
accounting officer, treasurer or controller of the Borrower.
"Fixed Charges" means, with respect to any fiscal period, the sum of
-------------
(a) Total Interest Expense and (b) the aggregate of all scheduled principal
payments on Total Outstanding Indebtedness according to GAAP made or required to
be made during such fiscal period for the Consolidated Businesses and Minority
Holdings (but excluding balloon payments of principal due upon the stated
maturity of an Indebtedness), and (c) the aggregate of all dividends payable on
the Company's or any of its consolidated Subsidiaries' preferred stock.
"Foreign Lender" means any Lender that is organized under the laws of
--------------
a jurisdiction other than that in which the Borrower is located. For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" means generally accepted accounting principles in the United
----
States of America.
"General Partner" means the Company and any successor general
---------------
partner(s) of the Borrower.
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
--------- ---------
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
---------------
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the
15
<PAGE>
purchase or payment of) such Indebtedness or other obligation or to purchase (or
to advance or supply funds for the purchase of) any security for the payment
thereof, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness or other obligation of the
payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or other obligation or (d)
as an account party in respect of any letter of credit or letter of guaranty
issued to support such Indebtedness or obligation; provided, that the term
--------
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.
"Guaranty" means the Guaranty of even date herewith made by the
--------
Company for the benefit of the Lenders.
"Haagen Agreement" means that certain Separation Agreement and Release
----------------
dated as of November 24, 1997 by and between ALEXANDER HAAGEN, SR., ALEXANDER
HAAGEN III, CHARLOTTE HAAGEN, AUTUMN HAAGEN, ALEXANDER HAAGEN III & BETTY HAAGEN
TRUST fbo ALEXANDER HAAGEN IV UA 10/24/88, ALEXANDER HAAGEN III & BETTY HAAGEN
TRUST fbo AUTUMN HAAGEN UA 10/24/88, ALEXANDER HAAGEN III & BETTY HAAGEN TRUST
fbo ANDREW HAAGEN UA 10/28/88, HAAGEN LIVING TRUST DATED AUGUST 17, 1988, AS
AMENDED AND RESTATED AS OF APRIL 18, 1996, HAAGEN LIMITED PARTNERSHIP, and
LAZARD FRERES REAL ESTATE INVESTORS, LLC, LFSRI, PROMETHEUS, and the COMPANY,
the BORROWER and HAAGEN PROPERTY MANAGEMENT, INC.
"Hazardous Material" means any substance, material or waste which is
------------------
regulated by any Governmental Authority of the United States as a "hazardous
waste," "hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste," "contaminant," "toxic waste," "toxic
substance" or words of similar meaning or import under any provision of
Environmental Law, which includes, but is not limited to, petroleum, petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"Hedging Agreement" means any interest rate protection agreement,
-----------------
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Improvements" means all buildings, fixtures, structures, parking
------------
areas, landscaping and all other improvements whether existing now or hereafter
constructed, together with all machinery and mechanical, electrical, HVAC and
plumbing systems presently located thereon and used in the operation thereof,
excluding (a) any such items owned by utility service providers, (b) any such
items owned by tenants or other third-parties unaffiliated with the Borrower and
(c) any items of personal property.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase
16
<PAGE>
price of property or services (excluding current accounts payable incurred in
the ordinary course of business), (f) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty and (j) all obligations, contingent or otherwise, of such Person in
respect of bankers' acceptances. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
-----------------
"Index Debt" means senior, unsecured, long-term indebtedness for
----------
borrowed money of the Borrower that is not guaranteed by any other Person or
subject to any other credit enhancement.
"Initial Mortgaged Properties" means those Eligible Projects set forth
----------------------------
on Schedule 5.13.
-------------
"Interest Election Request" means a request by the Borrower to convert
-------------------------
or continue a Borrowing in accordance with Section 2.08.
"Interest Payment Date" means (a) with respect to any ABR Loan, the
---------------------
last day of each month, and (b) with respect to any Eurodollar Loan, the last
day of the Interest Period applicable to the Borrowing of which such Loan is a
part and, in the case of a Eurodollar Borrowing with an Interest Period of more
than one month's duration, each day prior to the last day of such Interest
Period that occurs at intervals of one month duration after the first day of
such Interest Period.
"Interest Period" means with respect to any Eurodollar Borrowing, the
---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (i) if any Interest Period
--------
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, (ii) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period and (iii) Borrower may not elect two, three or six
month Interest Periods until 120 days after the Effective Date or such earlier
date as the Administrative Agent shall notify Borrower of the completion of its
syndication efforts. For purposes hereof, the date of a Borrowing initially
shall be the date on which such Borrowing is made and thereafter shall be the
effective date of the most recent conversion or continuation of such Borrowing.
17
<PAGE>
"Issuing Bank" means The Chase Manhattan Bank, in its capacity as the
------------
issuer of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.06(i). The Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of the Issuing
Bank, in which case the term "Issuing Bank" shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.
"Lazard Agreements" means, collectively, the Stockholders Agreement,
-----------------
the Stock Purchase Agreement and the Registration Rights Agreement.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to
---------------
a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
-----------
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time. The LC Exposure of any Lender at any time shall
be its Applicable Percentage of the total LC Exposure at such time.
"Lease" means a lease, license, concession agreement or other
-----
agreement providing for the use or occupancy of any portion of any Project,
including all amendments, supplements, modifications and assignments thereof and
all side letters or side agreements relating thereto.
"Legal Proceedings" means any judicial, administrative or arbitral
-----------------
actions, suits, proceedings (public or private) or governmental proceedings.
"Lenders" means the Persons listed on Schedule 2.01 and any other
------- -------------
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.
"Letter Agreement" means a letter agreement in the form attached as
----------------
EXHIBIT H hereto duly executed by Prometheus and LFSRI and duly acknowledged by
- ------- -
the Borrower and the Company.
"Letter of Credit" means any letter of credit issued pursuant to this
----------------
Agreement.
"Leverage Ratio" means the ratio, expressed as a percentage, of the
--------------
Total Outstanding Indebtedness to the Total Value.
"LFSRI" means LF Strategic Realty Investors, L.P., a Delaware limited
-----
partnership.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
---------
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
18
<PAGE>
Administrative Agent, from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
---------
Eurodollar Borrowing for such Interest Period shall be the rate (rounded
upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits of
$4,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
----
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means, collectively, this Agreement, the Notes, the
--------------
Guaranty, the Security Agreement, the Subsidiary Guaranties, the Collateral
Documents and each certificate, agreement, document or other instrument executed
by the Borrower or any of its Subsidiaries or the Company and delivered to the
Administrative Agent in connection with the transactions contemplated hereby, as
such agreements, documents or instruments may be amended, modified or
supplemented from time to time.
"Loan Year" means the period commencing on the Effective Date and
---------
ending on the anniversary thereof and each twelve (12) month period thereafter.
"Loans" means the loans made by the Lenders to the Borrower pursuant
-----
to this Agreement and "Loan" means a Loan made pursuant to Section 2.03.
---- ------------
"Margin Stock" means "margin stock" as such term is defined in
------------
Regulation U and Regulation G of the Federal Reserve Board as in effect from
time to time.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, assets, operations, or condition, financial or otherwise, of the
Company, the Borrower and the Subsidiaries taken as a whole, (b) the ability of
the Borrower or the Company to perform any of their respective obligations under
the Loan Documents or (c) the rights of or benefits available to the Lenders
under the Loan Documents.
"Material Indebtedness" means Indebtedness (other than the Loans and
---------------------
Letters of Credit), or obligations in respect of one or more Hedging Agreements,
of any one or more of the Borrower and its Subsidiaries in an aggregate
principal amount exceeding $25,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of the Borrower or any
Subsidiary in respect of any Hedging Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Subsidiary would be required to pay if such Hedging Agreement were
terminated at such time.
19
<PAGE>
"Maturity Date" means December 31, 2000.
-------------
"Minority Holdings" means partnerships, joint ventures and
-----------------
corporations held or owned by the Borrower and/or the Company which are not
wholly-owned by the Borrower and/or the Company.
"Moody's" means Moody's Investors Service, Inc.
-------
"Mortgage Documents" means with respect to any Eligible Project, the
------------------
following documents, where applicable, in the forms accepted by the
Administrative Agent for the Initial Mortgaged Properties on the Effective Date
subject to appropriate revisions for state or property specific requirements:
(a) A duly executed and acknowledged Mortgage, Assignment of Leases
and Environmental Indemnity for such Eligible Project.
(b) a commitment for a title insurance policy (the "Title Insurance
---------------
Policy") issued by a title company reasonably acceptable to the Administrative
- ------
Agent, in such form and amounts as are reasonably acceptable to the
Administrative Agent, insuring that the Mortgage is a valid first priority Lien
on such Mortgaged Project subject only to such exceptions to title as shall be
acceptable to the Administrative Agent in its reasonable discretion and
containing such endorsements and affirmative insurance as the Administrative
Agent may reasonably require and as are obtainable in the applicable
jurisdiction, and true copies of each document, instrument or certificate
required by the terms of each such policy or Mortgage to be, or have been,
filed, recorded, executed or delivered in connection therewith;
(c) an opinion reasonably satisfactory to the Administrative Agent of
counsel and/or local counsel retained by the Borrower with respect to the due
execution and delivery, validity and enforceability of the Mortgage Documents
and such other matters as may be reasonably required by the Administrative
Agent;
(d) duly executed UCC-1 Financing Statements under the applicable
Uniform Commercial Code to be filed in connection with such Mortgage in form and
substance reasonably satisfactory to the Administrative Agent, to perfect the
Lien created by the applicable Mortgage;
(e) (i) duly executed and acknowledged estoppel certificates, dated
not earlier than 30 days prior to the date of the Mortgage, from tenants under
Leases affecting 3,000 rentable square feet or more of such Mortgaged Property,
in form and substance reasonably satisfactory to the Administrative Agent and
(ii) duly executed and acknowledged Subordination and Attornment Agreements (in
recordable form and otherwise in the form attached as EXHIBIT F hereto) from
---------
such number of tenants of such Mortgaged Property as, when aggregated with (y)
tenants of the other Mortgaged Properties included for purposes of the Borrowing
Base that have delivered acceptable Subordination and Attornment Agreements, and
(z) other tenants of such Mortgaged Property and such other Mortgaged Properties
who occupy the Mortgaged Properties under Leases that are, by their terms,
subject and subordinate to the Liens of the respective
20
<PAGE>
Mortgages, account for not less than 80% of the aggregate base rental revenues
from all of the Mortgaged Properties;
(f) an ALTA survey and surveyor's certification for such Mortgaged
Property, in form and substance reasonably satisfactory to the Administrative
Agent and dated not more than six (6) months prior to the date such Project
becomes a Mortgaged Property;
(g) payment to the Administrative Agent, or as the Administrative
Agent may direct, of all title insurance premiums, documentary, stamp or
intangible taxes, recording fees and mortgage taxes payable in connection with
the recording of any of the Mortgage Documents or the issuance of the Title
Insurance Policy;
(h) an Appraisal for such Mortgaged Property; and
(i) such additional documents, information and materials relating to
such Mortgaged Property as the Administrative Agent may reasonably request.
"Mortgage Property Release" has the meaning assigned to such term in
-------------------------
Section 2.11(e).
"Mortgaged Property" means any Eligible Project subject to a Mortgage
------------------
in favor of the Administrative Agent.
"Mortgages" means the mortgages or deeds of trust securing, inter
--------- -----
alia, the Obligations, made or required herein to be made by the Borrower or any
- ----
of its Subsidiaries as such Mortgages may be amended, supplemented or otherwise
modified from time to time.
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA.
"Net Income (Loss)" means, for any Person for any period, the
-----------------
aggregate of net income (or loss) of such Person and its subsidiaries for such
period, determined on a consolidated basis in conformity with GAAP.
"Net Offering Proceeds" means all cash or other assets received by the
---------------------
Company as a result of the sale of Stock or Stock Equivalents in the Company,
less reasonable costs and expenses paid or incurred by the Company in connection
with such sale.
"NOI" means net operating income determined in accordance with GAAP,
---
as adjusted to eliminate the straight-lining of rents.
"Non-Recourse Indebtedness" of any Person means all Indebtedness of
-------------------------
such Person with respect to which recourse for payment is limited to specific
assets encumbered by a Lien securing such Indebtedness; provided, however, that
-------- -------
personal recourse of a holder of Indebtedness against any obligor with respect
thereto for fraud, misrepresentation, misapplication of cash, waste and other
circumstances customarily excluded from non-recourse provisions in non-recourse
financing of real estate shall not, by itself, prevent any Indebtedness
21
<PAGE>
from being characterized as Non-Recourse Indebtedness, provided further that if
-------- ------- ----
a personal recourse claim is made in connection therewith, such claim shall not
constitute Non-Recourse Indebtedness for the purposes of this Agreement.
"Note" means a promissory note in the form attached hereto as EXHIBIT
---- -------
A payable to a Lender, evidencing certain of the Obligations of the Borrower to
- -
such Lender and executed by the Borrower as set forth in Section 2.10 hereof, as
the same may be amended, supplemented, modified or restated from time to time;
"Notes" means, collectively, all of such Notes outstanding at any given time.
- ------
"Notice of Breach" has the meaning assigned to such term in the Letter
----------------
Agreement.
"Obligations" means the Loans, the LC Exposure and all other advances,
-----------
debts, liabilities, obligations, covenants and duties owing by the Borrower to
the Lenders, or any Affiliates of the Lenders (of every type and description,
present or future, whether or not evidenced by any note, guaranty or other
instrument) arising under this Agreement or under any other Loan Document,
whether or not for the payment of money, loan, guaranty, indemnification,
foreign exchange transaction or Hedging Agreement or in any other manner,
whether direct or indirect (including, without limitation, those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising under this Agreement or under any other Loan Document. The
term "Obligations" includes, without limitation, all interest, charges,
expenses, fees, attorneys' fees and disbursements and any other sum chargeable
to the Borrower under this Agreement or any other Loan Document.
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Order" means any order, injunction, judgment, decree, ruling,
-----
assessment or arbitration award.
"Outstanding Equity Infusion" means such portion of the Equity
---------------------------
Infusion as shall not have been made and in respect of which the Administrative
Agent has not received certification pursuant to Section 4(c) of the Security
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"Permit" means any permit, approval, authorization, license, variance,
------
registration, permission or consent required from a Governmental Authority under
an applicable Requirement of Law.
22
<PAGE>
"Permitted Encumbrances" means:
----------------------
(a) Liens imposed by law for taxes, assessments or governmental
charges or claims that are not yet due or are being contested in compliance
with Section 5.04;
(b) landlords', carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary
course of business and securing obligations that are not overdue by more
than 30 days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
government contracts, utility payments, leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature, in each case in the ordinary course of business;
(e) easements, zoning restrictions, rights-of-way, minor defects,
encroachments or irregularities in title and similar encumbrances on Real
Property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from
the value of the affected property or interfere with the ordinary conduct
of business of the Borrower or any Subsidiary; and
(f) any Lien securing the Obligations.
provided that the term "Permitted Encumbrances" shall not include any Lien
- -------- ----
securing Indebtedness other than Liens securing the Obligations.
"Permitted Investments" means:
---------------------
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$500,000,000;
23
<PAGE>
(d) certificates of deposit in an amount less than or equal to
$100,000 in the aggregate issued by any other bank insured by the Federal
Deposit Insurance Corporation;
(e) money market funds invested primarily in one or more of the
foregoing; and
(f) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in
clause (c) above.
"Permitted Securities Options" means any stock options, restricted
----------------------------
stock and other rights of any kind in or with respect to Stock of the Company or
the Borrower issued or granted to, or held by, any employee or director of the
Company or the Borrower.
"Person" means any natural person, corporation, limited liability
------
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
----
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PML" with respect to any Project, means the probable maximum loss for
---
such Project for purposes of earthquake insurance coverage.
"Prepayment Date" has the meaning assigned to such term in Section
---------------
2.11(c) hereof.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Project" means any retail properties owned, directly or indirectly,
-------
by any of the Consolidated Businesses or Minority Holdings and references to any
named Projects mean the Projects so identified on Schedule 5.13.
-------------
"Prometheus" means Prometheus Western Retail, LLC, a Delaware limited
----------
liability company.
"Property" means any Real Property or personal property, plant,
--------
building, facility, structure, equipment, General Intangible, Receivable, or
other asset owned or leased by any Consolidated Businesses or any Minority
Holding.
"Real Property" means all of present and future right, title and
-------------
interest
24
<PAGE>
(including, without limitation, any leasehold estate) in (i) any plots, pieces
or parcels of land, (ii) any Improvements of every nature whatsoever (the rights
and interests described in clauses (i) and (ii) above being the "Premises"),
(iii) all easements, rights of way, gores of land or any lands occupied by
streets, ways, alleys, passages, sewer rights, water courses, water rights and
powers, and public places adjoining such land, and any other interests in
property constituting appurtenances to the Premises, or which hereafter shall in
any way belong, relate or be appurtenant thereto, (iv) all hereditaments, gas,
oil, minerals (with the right to extract, sever and remove such gas, oil and
minerals), and easements, of every nature whatsoever, located in, on or
benefiting the Premises and (v) all other rights and privileges thereunto
belonging or appertaining and all extensions, additions, improvements,
betterments, renewals, substitutions and replacements to or of any of the rights
and interests described in clauses (iii) and (iv) above.
"Register" has the meaning set forth in Section 9.04.
--------
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated as of June 1, 1997, between the Company and Prometheus.
"REIT" means a domestic trust or corporation that qualifies as a real
----
estate investment trust under the provisions of Sections 856, et seq. of the
-- ---
Code.
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Release" means any release, spill, emission, leaking, pumping,
-------
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching or migration on or into the indoor or outdoor environment or into or
out of any property.
"Released Instruments" has the meaning assigned to such term in
--------------------
Section 2.11(e) hereof.
"Released Property" has the meaning assigned to such term in Section
-----------------
2.11(e) hereof.
"Remedial Action" means all actions, including without limitation any
---------------
Capital Expenditures, required or necessary to (i) clean up, remove, treat or in
any other way address any Hazardous Material or other substance in the indoor or
outdoor environment, (ii) prevent the Release or threat of Release, or minimize
the further Release, of any Hazardous Material or other substance so it does not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care, or (iv) bring facilities on
any property owned or leased by the Borrower or any of its Subsidiaries into
compliance with all Environmental Laws and Environmental Permits.
25
<PAGE>
"Required Lenders" means, at any time, Lenders having Commitments
----------------
representing at least 66.7% of the sum of the total Commitments at such time.
"Requirement of Law" means, as to any Person, the certificate of
------------------
incorporation and by-laws or other organizational or governing documents of such
Person, and all federal, state and local laws, rules and regulations, including,
without limitation, federal, state or local securities, antitrust and licensing
laws, all food, health and safety laws, and all applicable trade laws and
requirements, including, without limitation, all disclosure requirements of
Environmental Laws, ERISA and all orders, judgments, decrees or other
determinations of any Governmental Authority or arbitrator, applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"Responsible Officer" means the President or any Senior Vice President
-------------------
or Financial Officer of the General Partner.
"Restricted Payment" is defined in Section 6.01 hereof.
------------------
"S&P" means Standard & Poor's.
---
"Secured Indebtedness" means any Indebtedness secured by a Lien.
--------------------
"Secured Recourse Indebtedness" means any Secured Indebtedness of the
-----------------------------
Consolidated Businesses and of the Borrower's Minority Holdings, that is not
Non-Recourse Indebtedness.
"Senior Unsecured Indebtedness" means any Unsecured Indebtedness less
----------------------------- ----
the Subordinated Notes.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
----------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable non-personal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
"Stock" means shares of capital stock, beneficial or partnership
-----
interests, participations or other equivalents (regardless of how designated) of
or in a corporation or equivalent entity, whether voting or non-voting, and
includes, without limitation, common stock
26
<PAGE>
and preferred stock.
"Stock Equivalents" means all securities (other than Stock)
-----------------
convertible into or exchangeable for Stock and all warrants, options or other
rights to purchase or subscribe for any stock, whether or not presently
convertible, exchangeable or exercisable.
"Stock Purchase Agreement" means the Stock Purchase Agreement dated as
------------------------
of July 1, 1997, by and among Prometheus, LFSRI and the Company.
"Stock Purchase Certification" has the meaning set forth in the
----------------------------
Security Agreement.
"Stockholders Agreement" means the Stockholders Agreement dated as of
----------------------
June 1, 1997, by and among Lazard Freres Real Estate Investors, LLC, LFSRI,
Prometheus and the Company.
"Subordination and Attornment Agreement" means a Subordination, Non-
--------------------------------------
Disturbance and Attornment Agreement, (in recordable form and otherwise in the
form attached as EXHIBIT F hereto).
---------
"Subordinated Notes" means collectively, the Borrower's 7 1/4%
------------------
Exchangeable Subordinated Debentures due 2003 and the Company's 7 1/2%
Convertible Subordinated Debentures due 2001, Series A and Series B and other
Unsecured Indebtedness of the Borrower or the Company which, by its terms, is
subordinated to the Loans.
"subsidiary" means, with respect to any Person (the "parent") at any
---------- ------
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Company and/or the Borrower.
----------
"Subsidiary Guarantor" means each direct or indirect wholly owned
--------------------
Subsidiary of the Company and/or the Borrower which owns, either directly or
indirectly, all or any portion of any Project which is Unencumbered, of which
there are none as of the date hereof.
"Subsidiary Guaranty" means a guaranty, in substantially the form of
-------------------
EXHIBIT G, executed by each Subsidiary Guarantor, as such guaranty may be
- ------- -
amended, supplemented or otherwise modified from time to time.
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties,
27
<PAGE>
deductions, charges or withholdings imposed by any Governmental Authority.
"Three-Month Secondary CD Rate" means, for any day, the secondary
-----------------------------
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"Total Adjusted EBITDA" means, for any period, the aggregate sum of
---------------------
the Adjusted EBITDA for the Consolidated Businesses.
"Total Adjusted Unencumbered NOI" means, for any period, the aggregate
-------------------------------
sum of Adjusted NOI from the Consolidated Businesses and the Minority Holdings
for such period that represent revenues earned from Unencumbered Projects.
"Total Interest Expense" means, for any period, the sum of (i)
----------------------
interest expense of the Consolidated Businesses paid during such period and (ii)
interest expense of the Consolidated Businesses accrued and/or capitalized for
such period and (iii) the portion of the interest expense of Minority Holdings
allocable to the Borrower in accordance with GAAP and paid during such period
and (iv) the portion of the interest expense of Minority Holdings allocable to
the Borrower in accordance with GAAP and accrued and/or capitalized for such
period, in each case including participating interest expense but excluding
extraordinary interest expense, and net of amortization of deferred costs
associated with new financings or refinancings of existing Indebtedness.
"Total Outstanding Indebtedness" means, for any period, the sum of (i)
------------------------------
the amount of Indebtedness of the Consolidated Businesses set forth on the then
most recent quarterly financial statements of the Borrower, prepared in
accordance with GAAP, plus any additional Indebtedness incurred by the
Consolidated Businesses since the time of such statements, and (ii) the
outstanding amount of Minority Holding Indebtedness allocable in accordance with
GAAP to any of the Consolidated Businesses as of the time of determination, plus
any additional Minority Holding Indebtedness incurred by the Minority Holdings
allocable in accordance with GAAP to any of the Consolidated Businesses as of
the time of determination, and (iii) to the extent quantified, the Contingent
Obligations of the Consolidated Businesses and, to the extent allocable to the
Consolidated Businesses in accordance with GAAP, of the Minority Holdings.
"Total Outstanding Indebtedness Limitation" until the Conversion Date,
-----------------------------------------
has the meaning set forth in Section 6.01(a) hereof, and thereafter has the
meaning set forth in Section 6.01(b) hereof.
"Total Unsecured Outstanding Indebtedness Limitation" has the meaning
---------------------------------------------------
set
28
<PAGE>
forth in Section 6.01(b) hereof.
"Total Secured Outstanding Indebtedness" has the meaning set forth in
--------------------------------------
Section 6.01(b) hereof.
"Total Secured Outstanding Recourse Indebtedness" has the meaning set
-----------------------------------------------
forth in Section 6.01(b) hereof.
"Total Value" means, for any period, the aggregate sum of (i) with
-----------
respect to any Project or Minority Holding, which has been owned by the Borrower
or the Consolidated Businesses for not less than four (4) consecutive fiscal
quarters, as of the first day of each fiscal quarter for the immediately
preceding consecutive four (4) fiscal quarters, an amount equal to Adjusted NOI
relating to such Project or Minority Holding for such period divided by 9.5%,
----------
and (ii) with respect to any Project or Minority Holding, which has been owned
by the Borrower or the Consolidated Businesses for less than four (4)
consecutive fiscal quarters, an amount equal to Borrower's Investment in such
Project or Minority Holding, and (iii) the Cash and Cash Equivalents of the
Consolidated Business.
"Transactions" means the execution, delivery and performance by the
------------
Borrower of this Agreement, the borrowing of Loans, the use of the proceeds
thereof and the issuance of Letters of Credit hereunder.
"Type", when used in reference to any Loan or Borrowing, refers to
----
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"Unconsolidated Entity" means, with respect to any Person, at any date,
---------------------
any other Person in whom such Person holds an investment, which investment is
accounted for in the financial statements of such Person on an equity basis of
accounting and whose financial results would not be consolidated under GAAP with
the financial results of such Person on the consolidated financial statements of
such Person, if such statements were prepared as of such date.
"Unencumbered" means, with respect to any Project, at any date of
------------
determination, the circumstance that such Project on such date:
(a) is not subject to any Liens (including restrictions on
transferability or assignability) of any kind (including any such Lien or
restriction imposed by (i) any agreement governing Indebtedness, and (ii)
the organizational documents of the Borrower or any of its Subsidiaries or
Eligible Minority Holdings), but excluding Permitted Encumbrances;
(b) is not subject to any agreement (including (i) any agreement
governing Indebtedness, and (ii) if applicable, the organizational
documents of the Borrower or any of its Subsidiaries or Eligible Minority
Holdings) which prohibits or limits the ability of the Borrower or any of
its Subsidiaries or Eligible Minority Holdings to create, incur, assume or
suffer to exist any Lien upon such Project, other than Permitted
29
<PAGE>
Encumbrances (excluding any agreement or organizational document which
limits generally the amount of Indebtedness which may be incurred by the
Borrower or its Subsidiaries or Eligible Minority Holdings); and
(c) is not subject to any agreement (including any agreement
governing Indebtedness) which entitles any Person to the benefit of any
Lien (other than Permitted Encumbrances) on such Project, or would entitle
any Person to the benefit of any such Lien upon the occurrence of any
contingency (including, without limitation, pursuant to an "equal and
ratable" clause).
For the purposes of this Agreement, any Project owned by a Subsidiary or
Eligible Minority Holding of the Borrower shall not be deemed to be Unencumbered
unless both (i) such Project and (ii) all stock or ownership interests owned
directly or indirectly by Borrower in such Eligible Minority Holdings or
Subsidiary, is Unencumbered.
"Unsecured Indebtedness" means Total Outstanding Indebtedness that is
----------------------
not Secured Indebtedness.
"Unsecured Interest Expense" means, for any period, the interest
--------------------------
expense paid, accrued or capitalized on the Unsecured Indebtedness for the such
period.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
--------------------
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of
--------------------------------------
this Agreement, Loans may be classified and referred to by Type (e.g., a
----
"Eurodollar Loan"). Borrowings also may be classified and referred to by Type
(e.g., a "Eurodollar Borrowing").
----
SECTION 1.03. Terms Generally. The definitions of terms herein shall
---------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
30
<PAGE>
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
----------------------
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
--------
that, if the Borrower notifies the Administrative Agent that the Borrower
- ----
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits; Conversion to Unsecured
------------------------------------
SECTION 2.01. Commitments. Subject to the terms and conditions set
-----------
forth herein, each Lender agrees to make Loans to the Borrower from time to time
during the Availability Period in an aggregate principal amount that will not
result in (a) such Lender's Credit Exposure exceeding such Lender's Commitment
or (b) the sum of the total Credit Exposures exceeding the total Commitments;
provided, however, that at no time shall any Lender be obligated to make a Loan
- -------- -------
or Loans in excess of such Lender's Applicable Percentage of the Available
Credit. Within the foregoing limits and subject to the terms and conditions set
forth herein, the Borrower may borrow, prepay and reborrow Loans.
SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as
--------------------
part of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their respective Commitments. The failure of any Lender to make
any Loan required to be made by it shall not relieve any other Lender of its
obligations hereunder; provided that the Commitments of the Lenders are several
-------- ----
and no Lender shall be responsible for any other Lender's failure to make Loans
as required.
(b) Subject to Section 2.14, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that (i) any exercise of such option shall not affect the
-------- ----
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement and (ii) each Lender shall use reasonable efforts to select a
domestic or foreign branch or Affiliate that would not result in the Borrower
being required to pay additional amounts pursuant to Section 2.15 or Section
2.17.
(c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $500,000 and not less than $4,000,000. At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
integral multiple of $100,000 and not less than $1,000,000; provided that an ABR
-------- ----
Borrowing may be in an aggregate amount that is equal to the entire
31
<PAGE>
unused balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.06(e).
Borrowings of more than one Type may be outstanding at the same time; provided
--------
that there shall not at any time be more than a total of 6 Eurodollar Borrowings
- ----
outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
SECTION 2.03. Requests for Borrowings. To request a Borrowing, the
-----------------------
Borrower shall notify the Administrative Agent of such request by telephone (a)
in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City
time, three Business Days before the date of the proposed Borrowing or (b) in
the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one
Business Day before the date of the proposed Borrowing; provided that any such
-------- ----
notice of an ABR Borrowing to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.06(e) may be given not later than 10:00 a.m., New York
City time, on the date of the proposed Borrowing. Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.07.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month's duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Intentionally Deleted.
---------------------
SECTION 2.05. Intentionally Deleted.
---------------------
32
<PAGE>
SECTION 2.06. Letters of Credit.
-----------------
(a) General. Subject to the terms and conditions set forth herein,
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the Borrower may request the issuance of Letters of Credit for its own account,
in a form reasonably acceptable to the Administrative Agent and the Issuing
Bank, at any time and from time to time during the Availability Period. In the
event of any inconsistency between the terms and conditions of this Agreement
and the terms and conditions of any form of letter of credit application or
other agreement submitted by the Borrower to, or entered into by the Borrower
with, the Issuing Bank relating to any Letter of Credit, the terms and
conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
----------------------------------------------------------
Conditions. To request the issuance of a Letter of Credit (or the amendment,
- ----------
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a notice requesting the issuance
of a Letter of Credit, or identifying the Letter of Credit to be amended,
renewed or extended, the date of issuance, amendment, renewal or extension, the
date on which such Letter of Credit is to expire (which shall comply with
paragraph (c) of this Section), the amount of such Letter of Credit, the name
and address of the beneficiary thereof and such other information as shall be
necessary to prepare, amend, renew or extend such Letter of Credit. If requested
by the Issuing Bank, the Borrower also shall submit a letter of credit
application on the Issuing Bank's standard form in connection with any request
for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or
extended only if (and upon issuance, amendment, renewal or extension of each
Letter of Credit the Borrower shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or extension (i) the LC
Exposure shall not exceed $25,000,000.00 and (ii) the sum of the total Credit
Exposures shall not exceed the total Commitments.
(c) Expiration Date. Each Letter of Credit shall expire at or
---------------
prior to the close of business on the earlier of (i) the date one year after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an
--------------
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Lender, and each Lender hereby acquires from the Issuing
Bank, a participation in such Letter of Credit equal to such Lender's Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Lender's Applicable Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the
date due as provided in paragraph (e) of this Section, or of any reimbursement
payment required to be refunded to the Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter
33
<PAGE>
of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC
-------------
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 12:00 noon, New York City time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of such
LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if
such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that,
-------- ----
the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.03 or 2.05 that such payment be financed
with an ABR Borrowing in an equivalent amount and, to the extent so financed,
the Borrower's obligation to make such payment shall be discharged and replaced
by the resulting ABR Borrowing. If the Borrower fails to make such payment when
due, the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Lender's Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.07 with respect to Loans made by such Lender (and Section
2.07 shall apply, mutatis mutandis, to the payment obligations of the Lenders),
------- --------
and the Administrative Agent shall promptly pay to the Issuing Bank the amounts
so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the Issuing
Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing
Bank as their interests may appear. Any payment made by a Lender pursuant to
this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than
the funding of ABR Loans as contemplated above) shall not constitute a Loan and
shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
--------------------
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein; (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect; provided that payment by the Issuing Bank under
-------- ----
such Letter of Credit against presentation of such draft or document shall not
have constituted gross negligence or wilful misconduct of the Issuing Bank;
(iii) payment by the Issuing Bank under a Letter of Credit against presentation
of a draft or other document that does not comply with the terms of such Letter
of Credit; provided that such payment shall not have constituted gross
-------- ----
negligence or wilful misconduct of the Issuing Bank; or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing,
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<PAGE>
that might, but for the provisions of this Section, constitute a legal or
equitable discharge of, or provide a right of setoff against, the Borrower's
obligations hereunder; provided that such other circumstance or happening shall
-------------
not have been the result of gross negligence or wilful misconduct of the Issuing
Bank. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor
any of their Related Parties, shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of any Letter of Credit
or any payment or failure to make any payment thereunder (irrespective of any of
the circumstances referred to in the preceding sentence), or any error,
omission, interruption, loss or delay in transmission or delivery of any draft,
notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Bank; provided that the foregoing shall not be
-------- ----
construed to excuse the Issuing Bank from liability to the Borrower to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by the Issuing Bank's
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The parties
hereto expressly agree that, in the absence of gross negligence or willful
misconduct on the part of the Issuing Bank (as finally determined by a court of
competent jurisdiction), the Issuing Bank shall be deemed to have exercised care
in each such determination. In furtherance of the foregoing and without limiting
the generality thereof, the parties agree that, with respect to documents
presented which appear on their face to be in substantial compliance with the
terms of a Letter of Credit, the Issuing Bank may, in its sole discretion,
either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are
not in strict compliance with the terms of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
-----------------------
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
-------- ----
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
----------------
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Loans; provided that,
-------- ----
if the Borrower fails to reimburse such LC Disbursement when due pursuant to
paragraph (e) of this Section, then Section 2.13(d) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the Issuing Bank,
except that interest accrued on and after the date of payment by any Lender
pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be
for the account of such Lender to the extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be
-------------------------------
replaced at any
35
<PAGE>
time by written agreement among the Borrower, the Administrative Agent, the
replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent
shall notify the Lenders of any such replacement of the Issuing Bank. At the
time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.12(b). From and after the effective date of any such replacement, (i)
the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.
(j) Cash Collateralization. If any Event of Default shall occur
----------------------
and be continuing, on the Business Day that the Borrower receives notice from
the Administrative Agent or the Required Lenders demanding the deposit of cash
collateral pursuant to this paragraph, the Borrower shall deposit in an account
with the Administrative Agent, in the name of the Administrative Agent and for
the benefit of the Lenders, an amount in cash equal to the LC Exposure as of
such date plus any accrued and unpaid interest thereon; provided that the
-------- ----
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower described in clause (h) or (i) of Article VII. Such
deposit shall be held by the Administrative Agent as collateral for the payment
and performance of the obligations of the Borrower under this Agreement. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits, which investments shall be made at the
option and sole discretion of the Administrative Agent and at the Borrower's
risk and expense, such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account. Moneys in such
account shall be applied by the Administrative Agent to reimburse the Issuing
Bank for LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement
obligations of the Borrower for the LC Exposure at such time or, if the maturity
of the Loans has been accelerated (but subject to the consent of the Required
Lenders) be applied to satisfy other obligations of the Borrower under this
Agreement. If the Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, such amount (to
the extent not applied as aforesaid) shall be returned to the Borrower within
three Business Days after all Events of Default have been cured or waived.
SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make
---------------------
each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 12:00 noon, New York City time, to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such Loans
available to the Borrower not later than 3:00 p.m., New York City time, by wire
transfer of immediately available funds to an account in the United States
designated by the Borrower; provided that ABR Loans made to finance the
-------- ----
reimbursement of an
36
<PAGE>
LC Disbursement as provided in Section 2.06(e) shall be remitted by the
Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
SECTION 2.08. Interest Elections. (a) Each Borrowing initially
------------------
shall be of the Type specified in the applicable Borrowing Request and, in the
case of a Eurodollar Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request. Thereafter, the Borrower may elect to
convert such Borrowing to a different Type or to continue such Borrowing and, in
the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as
provided in this Section. The Borrower may elect different options with respect
to different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such
Interest
37
<PAGE>
Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing
or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.09. Termination and Reduction of Commitments. (a) Unless
----------------------------------------
previously terminated, the Commitments shall terminate on the Maturity Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments; provided that (i) each reduction of the Commitments
-------- ----
shall be in an amount that is an integral multiple of $1,000,000 and not less
than $5,000,000 and (ii) the Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Loans in
accordance with Section 2.11, the sum of the Credit Exposures would exceed the
total Commitments.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable; provided that a notice
-------- ----
of termination of the Commitments delivered by the Borrower may state that such
notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments
shall be permanent. Each reduction
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<PAGE>
of the Commitments shall be made ratably among the Lenders in accordance with
their respective Commitments.
SECTION 2.10. Repayment of Loans; Evidence of Debt. (a) The
------------------------------------
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of each Lender the then unpaid principal amount of each Loan on the
Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Type thereof and
the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
----- -----
amounts of the obligations recorded therein; provided that the failure of any
-------- ----
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a
Note. In such event, the Borrower shall prepare, execute and deliver to such
Lender a Note payable to the order of such Lender (or, if requested by such
Lender, to such Lender and its registered assigns). Thereafter, the Loans
evidenced by such Note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more Notes in such
form payable to the order of the payee named therein.
SECTION 2.11. Prepayment of Loans; Release of Mortgaged
-----------------------------------------
Property/Subsidiary Guaranty. (a) The Borrower shall have the right at any
- ----------------------------
time and from time to time to prepay any Borrowing in whole or in part, subject
to prior notice in accordance with paragraph (b) of this Section.
(b) The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New York City
time, three Business Days before the date of prepayment, or (ii) in the case of
prepayment of an ABR Borrowing, not later than 12:00 noon, New York City time,
one Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
each Borrowing or portion thereof to be prepaid; provided that, if a notice of
-------- ----
prepayment is given in connection with a conditional notice of termination of
the Commitments as contemplated by Section 2.09, then such notice of prepayment
may be revoked if such notice of termination is revoked in accordance with
Section 2.09. Promptly following receipt of any such
39
<PAGE>
notice relating to a Borrowing, the Administrative Agent shall advise the
Lenders of the contents thereof. Each partial prepayment of any Borrowing shall
be in an amount that would be permitted in the case of an advance of a Borrowing
of the same Type as provided in Section 2.02. Each prepayment of a Borrowing
shall be applied ratably to the Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 2.13.
(c) If at any time from and after the Closing Date, (i) the Company or
the Borrower merges or consolidates with another Person and the Company or
Borrower as the case may be, is not the surviving entity, or (ii) the Company,
the Borrower, any of its consolidated Subsidiaries ceases to provide property
management services (excluding for such purposes property management contracts
with third parties that are terminable on not more than 30 days' notice) to
Projects accounting for at least 80% of the aggregate base rental revenues from
all of the Projects in which the Borrower has an ownership interest (the date
any such event shall occur being the "Prepayment Date"), the Borrower shall be
---------------
required to prepay the Loans in their entirety as if the Prepayment Date were
the Maturity Date and, the Commitment thereupon shall be terminated. The
Borrower shall immediately make such prepayment on the principal amount prepaid
and shall return or cause to be returned all Letters of Credit to the Issuing
Bank. In connection with the prepayment of any Loan prior to the maturity
thereof, the Borrower shall also pay any applicable expenses pursuant to Section
2.16 hereof. Each such prepayment shall be applied to prepay ratably the Loans
of the Lender. Amounts prepaid pursuant to this clause (c) may not be
reborrowed.
(d) If at any time the aggregate Credit Exposure of the Lenders at
such time exceeds the lower of the Borrowing Base or the then effective
Commitments at such time (a "Borrowing Base Imbalance"), the Borrower shall
------------------------
prepay the Loans then outstanding in an amount equal to such excess, together
with accrued interest within one (1) Business Day of such event occurring.
(e) Provided that no Default or Event of Default has occurred and is
continuing, the Borrower shall have the right, subject to the provisions of this
Section 2.11, to obtain a release of a Mortgaged Property from the Lien of the
Mortgage Documents relating thereto ("Mortgage Property Release"). In the event
-------------------------
Borrower seeks to obtain a Mortgage Property Release, the Administrative Agent
shall release such Mortgaged Property (the "Released Property") from the Lien of
-----------------
the Mortgage Documents relating thereto, but only upon satisfaction of all of
the following conditions:
(i) Any request for Mortgage Property Release shall be made in
writing to the Administrative Agent no less than five (5) Business Days
prior to the date of the requested Mortgage Property Release;
(ii) Borrower shall pay all of the Administrative Agent's reasonable
costs and expenses including counsel fees and disbursements, incurred in
connection with the Mortgage Property Release and the review and approval
of the documents (the "Release Instruments") and information required to be
-------------------
delivered in connection therewith;
(iii) Borrower shall deliver to the Administrative Agent
simultaneously with the
40
<PAGE>
request referred to in clause (i) above, a Borrowing Base Certificate
signed by a Responsible Officer of Borrower, representing and certifying
the pro forma calculations after giving effect to the proposed Mortgage
--- -----
Property Release, and if such pro forma Borrowing Base Certificate
demonstrates that the Mortgage Property Release would result in a Borrowing
Base Imbalance, Borrower shall prepay Loans in accordance with clause (d)
above; and
(f) Provided that no Default or Event of Default has occurred and is
continuing, the Borrower shall have the right, subject to the provisions of this
Section 2.11, to obtain a release of a Subsidiary Guaranty in the event that the
applicable Subsidiary Guarantor proposes to encumber its Projects otherwise than
to secure the Obligations. In the event Borrower seeks such a release of a
Subsidiary Guaranty, the Administrative Agent shall release such Subsidiary
Guaranty, but only upon satisfaction of all of the following conditions:
(i) Any request for such release shall be made in writing to the
Administrative Agent no less than five (5) Business Days prior to the date
of the requested release;
(ii) Borrower shall pay all of the Administrative Agent's reasonable
costs and expenses including counsel fees and disbursements, incurred in
connection with such release and the review and approval of the documents
and information required to be delivered in connection therewith; and
(iii) In the event that any of the Projects owned by the applicable
Subsidiary Guarantor are included for purposes of the Borrowing Base, the
Borrower shall deliver to the Administrative Agent simultaneously with the
request referred to in clause (i) above, a Borrowing Base Certificate
signed by a Responsible Officer of Borrower, representing and certifying
the pro forma calculations after omitting such Projects, and if such pro
--- -----
forma Borrowing Base Certificate demonstrates that the omission of such
Projects would result in a Borrowing Base Imbalance, Borrower shall prepay
Loans in accordance with clause (d) above.
SECTION 2.12. Fees. (a) The Borrower agrees to pay to the
----
Administrative Agent for the account of each Lender an unused facility fee,
which shall accrue at a rate of 0.25% per annum on the daily amount of the
unused Commitment of such Lender during the period from and including the date
hereof to but excluding the date on which such Commitment terminates. Accrued
unused facility fees shall be payable in arrears on the last day of March, June,
September and December of each year and on the date on which the Commitments
terminate, commencing on March 31, 1998. All unused facility fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
(b) The Borrower agrees to pay (i) to the Administrative Agent for
the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at a rate of 1.50% per
annum on the average daily amount of such Lender's LC Exposure (excluding any
portion thereof attributable to unreimbursed LC Disbursements) during the period
from and including the Effective Date to but excluding the later of the date on
which such Lender's Commitment terminates and the date on which such Lender
ceases to have any LC
41
<PAGE>
Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the
rate or rates per annum separately agreed upon between the Borrower and the
Issuing Bank on the average daily amount of the LC Exposure (excluding any
portion thereof attributable to unreimbursed LC Disbursements) during the period
from and including the Effective Date to but excluding the later of the date of
termination of the Commitments and the date on which there ceases to be any LC
Exposure, as well as the Issuing Bank's standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing March
31, 1998; provided that all such fees shall be payable on the date on which the
-------- ----
Commitments terminate and any such fees accruing after the date on which the
Commitments terminate shall be payable on demand. Any other fees payable to the
Issuing Bank pursuant to this paragraph shall be payable within 10 days after
demand. All participation fees and fronting fees shall be computed on the basis
of a year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
facility fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.
SECTION 2.13. Interest. (a) The Loans comprising each ABR
--------
Borrowing shall bear interest at the Alternate Base Rate plus the Applicable
Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest, at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.
(c) Intentionally Deleted.
(d) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.
(e) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and, upon termination of the Commitments;
provided that (i) interest accrued pursuant to paragraph (d) of this Section
- -------- ----
shall be payable on demand, (ii) in the event of any repayment or prepayment of
any Loan (other than a prepayment of an ABR Loan prior to the end of the
Availability Period), accrued interest on the principal amount repaid or
42
<PAGE>
prepaid shall be payable on the date of such repayment or prepayment and (iii)
in the event of any conversion of any Eurodollar Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be payable
on the effective date of such conversion.
(f) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate or shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
SECTION 2.14. Alternate Rate of Interest. If prior to the
--------------------------
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders of making or maintaining their
Loans included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and, (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
SECTION 2.15. Increased Costs. (a) If any Change in Law shall:
---------------
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or Eurodollar
Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or
43
<PAGE>
the Issuing Bank hereunder (whether of principal, interest or otherwise), then
the Borrower will pay in accordance with clause (c) hereof to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank, as the case may be, for such
additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a consequence
of this Agreement or the Loans made by, or participations in Letters of Credit
held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company could have achieved but for such Change in Law
(taking into consideration such Lender's or the Issuing Bank's policies and the
policies of such Lender's or the Issuing Bank's holding company with respect to
capital adequacy), then from time to time the Borrower will pay in accordance
with clause (c) hereof to such Lender or the Issuing Bank, as the case may be,
such additional amount or amounts as will compensate such Lender or the Issuing
Bank or such Lender's or the Issuing Bank's holding company for any such
reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
--------
that the Borrower shall not be required to compensate a Lender or the Issuing
- ----
Bank pursuant to this Section for any increased costs or reductions incurred
more than 180 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
-------- ------- ----
in Law giving rise to such increased costs or reductions is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.
SECTION 2.16. Break Funding Payments. In the event of (a) the
----------------------
payment of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
2.11(b) and is revoked in accordance therewith), or (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.19, then,
in any such event, the Borrower shall compensate each Lender for the loss, cost
and expense actually incurred to such event. In the case of a Eurodollar Loan,
such loss,
44
<PAGE>
cost or expense to any Lender shall be deemed to include an amount determined by
such Lender to be the excess, if any, of (i) the amount of interest which would
have accrued on the principal amount of such Loan had such event not occurred,
at the Adjusted LIBO Rate that would have been applicable to such Loan, for the
period from the date of such event to the last day of the then current Interest
Period therefor (or, in the case of a failure to borrow, convert or continue,
for the period that would have been the Interest Period for such Loan), over
(ii) the amount of interest which would accrue on such principal amount for such
period at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market. A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.
SECTION 2.17. Taxes. (a) Any and all payments by or on account of
-----
any obligation of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if the
-------- ----
Borrower shall be required by law to deduct any Indemnified Taxes or Other Taxes
from such payments, then (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each
Lender and the Issuing Bank, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority; provided that the Borrower
-------- ----
shall not be required to indemnify the Administrative Agent, any Lender or the
Issuing Bank for any penalties, interest or expenses incurred as a result of
gross negligence or willful misconduct of the Administrative Agent, such Lender
or the Issuing Bank, as the case may be. A certificate as to the amount of such
payment or liability delivered to the Borrower by a Lender or the Issuing Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or the
Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental
45
<PAGE>
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.
(e) Each Foreign Lender, so long as such Foreign Lender remains
lawfully able to do so, shall provide the Borrower with Internal Revenue Service
form 1001 or 4224, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Foreign Lender is entitled to
benefits under an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest or certifying that
the income receivable pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States. If the form provided
by a Foreign Lender at the time such Foreign Lender first became a party to this
Agreement or at any time thereafter (other than by reason of a change in United
States law, or a change in the terms of any treaty to which the United States is
a party after the date hereof, or any interpretation thereof), indicates a
United States interest withholding tax rate in excess of zero, withholding tax
at such rate shall be considered excluded from the definition of "Indemnified
Taxes" for periods governed by such form. If any form or document referred to
in this subsection (e) requires the disclosure of information, other than
information necessary to compute the tax payable and information required on the
date hereof by Internal Revenue Service form 1001 or 4224, that the Foreign
Lender reasonably considers to be confidential, the Foreign Lender shall give
notice thereof to the Borrower and shall not be obligated to include in such
form or document such confidential information unless the failure to provide
such information would result in the Borrower being required to pay such Lender
Indemnified Taxes or Other Taxes pursuant to this Section 2.17.
(f) For any period with respect to which a Foreign Lender has failed
to provide the Borrower with the appropriate form pursuant to Section 2.17(e)
(unless such failure is due to a change in treaty, law or regulation, or any
interpretation thereof, occurring subsequent to the date on which a form
originally was required to be provided or because the Foreign Lender is not
lawfully able to do so), such Foreign Lender shall not be entitled to
indemnification under Section 2.17(a) with respect to Taxes imposed by the
United States.
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of
--------------------------------------------------
Set-offs. (a) The Borrower shall make each payment required to be made by it
- --------
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or
otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 380 Madison Avenue,
New York, New York, except payments to be made directly to the Issuing Bank as
expressly provided herein and except that payments pursuant to Sections 2.15,
2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
46
<PAGE>
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, unreimbursed
LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or participations in LC Disbursements resulting in
such Lender receiving payment of a greater proportion of the aggregate amount of
its Loans and participations in LC Disbursements than the proportion received by
any other Lender, then the Lender receiving such greater proportion shall
purchase (for cash at face value) participations in the Loans and participations
in LC Disbursements of other Lenders to the extent necessary so that the benefit
of all such payments shall be shared by the Lenders ratably in accordance with
the aggregate amount of principal of and accrued interest on their respective
Loans and participations in LC Disbursements; provided that (i) if any such
-------- ----
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made
by it
47
<PAGE>
pursuant to Section 2.05(c), 2.06(d) or (e), 2.07(b) or 2.18(d), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Sections until all such unsatisfied obligations are fully paid.
SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a)
----------------------------------------------
If any Lender requests compensation under Section 2.15, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort (provided that the payment of such
-------- ----
expense shall not in any way affect the ability of the Borrower to pursue
damages from any Lender which defaults in its obligation to fund Loans
hereunder, including, without limitation, any expenses related to finding a
replacement Lender), upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in Section 9.04), all its interests,
rights and obligations under this Agreement to an assignee that shall assume
such obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) unless such assignment is to an existing Lender,
-------- ----
the Borrower shall have received the prior written consent of the Administrative
Agent (and, if a Commitment is being assigned, the Issuing Bank), which consent
shall not unreasonably be withheld, (ii) such Lender shall have received payment
of an amount equal to the outstanding principal of its Loans and participations
in LC Disbursements accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 2.15 or payments required to be made
pursuant to Section 2.17, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.
SECTION 2.20. Conversion to Unsecured Facility. In the event that
--------------------------------
(i) the Borrower shall deliver to the Administrative Agent, a Compliance
Certificate duly executed by a Financial Officer (together with supporting
evidence satisfactory to the Administrative Agent in its sole discretion)
evidencing compliance with all of the covenants set forth in Section 6.01(b)
hereof, and (ii) the conditions set forth in Section 4.02 (a), (b), (c), (e) and
(g) shall each be satisfied as of the Conversion Date, then, at the option of
the Borrower, such option to be
48
<PAGE>
exercised by written notice to the Administrative Agent, effective as of the
first day of the Interest Period following the date upon which the
Administrative Agent receives such Compliance Certificate and such notice (the
"Conversion Date"), the Obligations shall become unsecured and Lender shall,
- ----------------
upon the written request and at the expense of the Borrower, release the
Mortgaged Properties and deliver Release Instruments therefor.
ARTICLE III
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrower, the
--------------------
Company and their subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required. Neither the Borrower, the Company nor any of their
subsidiaries are "foreign persons" within the meaning of Section 1445 of the
Code.
SECTION 3.02. Authorization; Enforceability. (a) The Transactions
-----------------------------
have been duly authorized by all necessary partnership action of the Borrower
and the General Partner has the requisite power and authority to execute,
deliver and perform this Agreement and the other Loan Documents on behalf of the
Borrower. This Agreement has been duly executed and delivered by the Borrower
and constitutes a legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
(b) Schedule 3.02(b) contains a diagram indicating as of the
Effective Date the ownership structure of the Borrower, and any other Person in
which the Borrower holds a direct or indirect partnership, joint venture or
other equity interest, indicating the nature of such interest with respect to
each Person included in such diagram and accurately sets forth (1) the correct
legal name of such Person, the jurisdiction of its incorporation or organization
and the jurisdictions in which it is qualified to transact business as a foreign
corporation, or otherwise, and (2) the authorized, issued and outstanding shares
or interests of each class of Securities of the Company. As of the Effective
Date, none of such issued and outstanding Securities is subject to any vesting,
redemption, or repurchase agreement, and there are no warrants or options (other
than Permitted Securities Options) outstanding with respect to such Securities,
except as noted on such Schedule. The outstanding Capital Stock of the Company
is duly authorized, validly issued, fully paid and nonassessable.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
------------------------------------
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and
49
<PAGE>
effect, (b) will not violate any applicable law or regulation or the charter,
by-laws, partnership agreement or other organizational documents of the Borrower
or any of its Subsidiaries, or the Company or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries, and (d) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries other than Permitted Encumbrances.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a)
-----------------------------------------------
Each of the Borrower and the Company has heretofore furnished to the Lenders (i)
in the case of the Company, its annual audited financial statements for the
fiscal year ended December 31, 1996, reported on by Deloitte & Touche,
independent public accountants, and in the case of the Borrower, its unaudited
annual financial statements for the fiscal year ended December 31, 1996
certified by its chief financial officer, and (ii) quarterly financial
statements for the fiscal quarter ended September 30, 1997, certified by its
chief financial officer. Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of the Company and the Borrower and its consolidated Subsidiaries as of
such dates and for such periods in accordance with GAAP, subject, in the case of
the Company's statements to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in clause (ii) above.
(b) Neither the Company, the Borrower nor any of Borrower's
Subsidiaries has any Contingent Obligation or liability for any taxes, long-term
leases or commitments, not reflected in the most recent audited financial
statements delivered to the Administrative Agent pursuant to this Agreement or
otherwise disclosed to the Administrative Agent and the Lenders in writing,
which will have or is reasonably likely to have a Material Adverse Effect.
(c) Schedule 3.04 sets forth, as of the Effective Date, all
Indebtedness of the Company, the Borrower and the Borrower's Subsidiaries and,
as of the Effective Date, except as set forth on Schedule 3.04, there are no
defaults in the payment of principal or interest on any such Indebtedness and no
payments thereunder have been deferred or extended beyond their stated maturity
and there has been no material change in the type or amount of such Indebtedness
(except for the repayment of certain Indebtedness) since the Effective Date.
SECTION 3.05. Properties. (a) Each of the Borrower and its
----------
Subsidiaries and Eligible Minority Holdings own good and marketable fee simple
absolute title to all of the Real Property purported to be owned by them, which
Real Property is at the date hereof described in Schedule 3.05(a), and good and
marketable title to, or valid leasehold interests in, all other properties and
assets purported to be leased by the Borrower or any of its Subsidiaries or
Eligible Minority Holdings. Each of the Borrower and its Subsidiaries or
Eligible Minority Holdings received all deeds, assignments, waivers, consents,
non-disturbance and recognition or similar agreements, bills of sale and other
documents, and have duly effected all recordings, filings and other actions
necessary to establish, protect and perfect Borrower's and its Subsidiaries' or
Eligible Minority Holdings' right, title and interest in and to all such
property except for such documents or actions the failure to obtain or
accomplish which would not have a Material Adverse Effect.
50
<PAGE>
(b) All material Real Property leased at the date hereof by the
Borrower or any of its Subsidiaries or Eligible Minority Holdings is listed on
Schedule 3.05(b). Each of such leases is valid and enforceable in accordance
with its terms and is in full force and effect. The Borrower has delivered to
the Administrative Agent true and complete copies of each of such leases and all
documents affecting the rights or obligations of the Borrower or any of its
Subsidiaries or Eligible Minority Holdings which is a party thereto, including,
without limitation, any non-disturbance and recognition agreements,
subordination agreements, attornment agreements and agreements regarding the
term or rental of any of the leases. None of the Borrower or any of its
respective Subsidiaries or Eligible Minority Holdings nor, to the knowledge of
the Borrower, any other party to any such lease is in default of its obligations
thereunder or has delivered or received any notice of default under any such
lease, nor has any event occurred which, with the giving of notice, the passage
of time or both, would constitute a default under any such lease, except for
defaults which in the aggregate have no Material Adverse Effect.
(c) All components of all improvements included within the Projects
owned or leased, as lessee, by the Borrower or any of its Subsidiaries or
Eligible Minority Holding (collectively, "Improvements"), including, without
limitation, the roofs and structural elements thereof and the heating,
ventilation, air conditioning, plumbing, electrical, mechanical, sewer, waste
water, storm water, paving and parking equipment, systems and facilities
included therein, are in good working order and repair, subject to such
exceptions which are not reasonably likely to have, in the aggregate, a Material
Adverse Effect. All water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and other similar
systems serving the Projects owned or leased by the Borrower or any of its
Subsidiaries or are installed and operating and are sufficient to enable the
Real Property owned or leased by the Borrower and its respective Subsidiaries or
Eligible Minority Holdings to continue to be used and operated in the manner
currently being used and operated, and neither Borrower nor any of its
Subsidiaries or Eligible Minority Holdings has any knowledge of any factor or
condition that reasonably could be expected to result in the termination or
material impairment of the furnishing thereof. No Improvement or portion
thereof is dependent for its access, operation or utility on any land, building
or other Improvement not included in the Real Property owned or leased by the
Borrower or any of its Subsidiaries or Eligible Minority Holdings other than for
access provided pursuant to a recorded easement or other right of way
establishing the right of such access.
(d) All Permits required to have been issued or appropriate to enable
all Real Property owned or leased by the Borrower or any of its Subsidiaries or
Eligible Minority Holdings to be lawfully occupied and used for all of the
purposes for which they are currently occupied and used have been lawfully
issued and are in full force and effect, other than those which in the aggregate
have no Material Adverse Effect.
(e) Neither Borrower nor any of its Subsidiaries or Eligible Minority
Holdings has received any notice, or has any knowledge, of any pending,
threatened or contemplated condemnation proceeding affecting any Real Property
owned or leased by the Borrower or any of its Subsidiaries or Eligible Minority
Holdings or any part thereof, or any proposed termination or impairment of any
parking at any such owned or leased Real Property or of any sale or other
51
<PAGE>
disposition of any Real Property owned or leased by the Borrower or any of its
Subsidiaries or Eligible Minority Holdings or any part thereof in lieu of
condemnation, which in the aggregate, are reasonably likely to have a Material
Adverse Effect.
(f) Except for events or conditions not reasonably likely to have, in
the aggregate, a Material Adverse Effect, (i) no portion of any Real Property
owned or leased by the Borrower or any of its Subsidiaries or Eligible Minority
Holdings has suffered any material damage by fire or other casualty loss which
has not heretofore been completely repaired and restored to its condition prior
to such casualty, and (ii) no portion of any Real Property owned or leased by
the Borrower or any of its Subsidiaries or Eligible Minority Holdings is located
in a special flood hazard area as designated by any Federal Governmental
Authorities.
(g) Each of the Borrower and its Subsidiaries and Eligible Minority
Holdings owns, or is licensed to use, all trademarks, tradenames, copyrights,
patents and other intellectual property material to its business, and the use
thereof by the Borrower and its Subsidiaries and Eligible Minority Holdings and
does not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters. (a) There are
------------------------------------
no Legal Proceedings pending against or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any of its Subsidiaries (i) as
to which there is a reasonable possibility of an adverse determination and that,
if adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters (which the Borrower represents and warrants to the Lenders and the
Administrative Agent would not reasonably be expected to have a Material Adverse
Effect)) or (ii) that involve this Agreement or the Transactions.
(b) Except for Disclosed Matters (which the Borrower represents and
warrants to the Lenders and the Administrative Agent would not reasonably be
expected to have a Material Adverse Effect):
(i) to the best knowledge of Borrower and its Subsidiaries, all
Real Property leased or owned by the Borrower or any of its Subsidiaries or
Eligible Minority Holdings free from contamination by any Hazardous
Material which could reasonably be expected to subject the Borrower or any
of its Subsidiaries to Environmental Liabilities and Costs which would have
a Material Adverse Effect;
(ii) the operations of the Borrower and each of its Subsidiaries
or Eligible Minority Holdings, and the operations at any Real Property
leased or owned by the Borrower or any of its Subsidiaries or Eligible
Minority Holdings are in material compliance with all applicable
Environmental Laws;
(iii) neither the Borrower nor any of its Subsidiaries or
Eligible Minority Holdings have liabilities with respect to Hazardous
Materials and, to the best knowledge of the Borrower and its Subsidiaries,
no facts or circumstances exist which could give rise to liabilities with
respect to Hazardous Materials which could reasonably
52
<PAGE>
be expected to subject the Borrower or any of its Subsidiaries to
Environmental Liabilities and Costs which would have a Material Adverse
Effect;
(iv) (A) the Borrower and its Subsidiaries and Eligible Minority
Holdings and all Real Property owned or leased by the Borrower or its
Subsidiaries and Eligible Minority Holdings have all Environmental Permits
necessary for the operations at such Real Property and are in material
compliance with such Environmental Permits, (B) there are no Legal
Proceedings pending nor, to the best knowledge of the Borrower and its
Subsidiaries, threatened to revoke, or alleging the violation of, such
Environmental Permits, and (C) neither the Borrower nor any of its
Subsidiaries or Eligible Minority Holdings have received any notice from
any source to the effect that there is lacking any Environmental Permit
required in connection with the current use or operation of any property
leased or owned by the Borrower or any of its Subsidiaries or Eligible
Minority Holdings;
(v) neither the Borrower's nor any of its Subsidiaries' or
Eligible Minority Holdings' current facilities and operations, nor, to the
best knowledge of the Borrower and its Subsidiaries, any predecessor of the
Borrower or any of its Subsidiaries or Eligible Minority Holdings, nor any
of the Borrower's or its Subsidiaries' or Eligible Minority Holdings' past
facilities and operations, nor to the best knowledge of the Borrower and
its Subsidiaries, any owner of premises leased or operated by the Borrower
and its Subsidiaries and Eligible Minority Holdings, are subject to any
outstanding written Order or contract, including Environmental Liens, with
any Governmental Authority or other Person, or to any federal, state,
local, foreign or territorial investigation respecting (A) Environmental
Laws, (B) Remedial Action, (C) any Environmental Claim, or (D) the Release
or threatened Release of any Hazardous Material;
(vi) neither the Borrower nor any of its Subsidiaries or Eligible
Minority Holdings are subject to any pending Legal Proceeding alleging the
violation of any Environmental Law with respect to a Project nor, to the
best knowledge of the Borrower and its Subsidiaries, are any such
proceedings threatened;
(vii) neither the Borrower nor any of its Subsidiaries or
Eligible Minority Holdings nor, to the best knowledge of the Borrower and
its Subsidiaries, any predecessor of the Borrower or any of its
Subsidiaries or Eligible Minority Holdings, nor to the best knowledge of
the Borrower and its Subsidiaries any owner of premises leased by the
Borrower or any of its Subsidiaries or Eligible Minority Holdings, have
filed any notice under federal, state or local, territorial or foreign law
indicating past or present treatment, storage, or disposal of or reporting
a Release of Hazardous Material into the environment;
(viii) none of the operations of the Borrower or any of its
Subsidiaries or Eligible Minority Holdings or, to the best knowledge of the
Borrower and its Subsidiaries, of any predecessor of the Borrower or any of
its Subsidiaries or Eligible Minority Holdings, or, to the best knowledge
of the Borrower and its Subsidiaries, of any owner of premises leased by
the Borrower or any of its Subsidiaries or Eligible Minority
53
<PAGE>
Holdings, involve or previously involved the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined under 40
C.F.R. Part 261.3 (in effect as of the date of this Agreement) or any
state, local, territorial or foreign equivalent; and
(ix) there is not now, nor to the best knowledge of the Borrower
and its Subsidiaries, has there been in the past, on, in or under any Real
Property leased or owned by the Borrower or any of its Subsidiaries or
Eligible Minority Holdings, to the best knowledge of the Borrower and its
Subsidiaries or any of their predecessors (A) any underground storage tanks
or surface tanks, dikes or impoundments (other than for surface water), (B)
any friable asbestos-containing materials, (C) any polychlorinated
biphenyls, or (D) any radioactive substances other than naturally-occurring
radioactive material.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of the
-----------------------------------
Borrower and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has
occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. Neither the
-------------------------------------
Company, the Borrower nor any of its Subsidiaries is (a) an "investment company"
as defined in, or subject to regulation under, the Investment Company Act of
1940 or (b) a "holding company" as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of the Company, Borrower and its
-----
Subsidiaries has timely filed or caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes that are being contested in good faith
by appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
-----
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $250,000 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $250,000 the fair market value of
the assets of all such underfunded Plans.
54
<PAGE>
SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders
----------
all agreements, instruments and corporate or other restrictions to which it or
any of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
-------- ----
with respect to Projected financial information, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.
SECTION 3.12. Insurance. Schedule 3.12 accurately sets forth all
---------
insurance policies and programs that will be in effect with respect to the
Property, assets and business of the Borrower and its Subsidiaries, effective as
of January 1, 1998, specifying for each such policy and program, (i) the amount
thereof, (ii) the risks insured against thereby, (iii) the name of the insurer
and each insured party thereunder, (iv) the policy or other identification
number thereof, and (v) the expiration date thereof. The Borrower has delivered
to the Administrative Agent copies of all insurance policies set forth on
Schedule 3.12. As of the Effective Date, such insurance policies and programs
are in full force and effect.
SECTION 3.13. REIT Status. The Company is organized in conformity
-----------
with the requirements for qualification as an equity-oriented REIT under the
Code. The Company has met all of the requirements for qualification as an
equity-oriented REIT under the Code for its fiscal year ended December 31, 1996.
The Company is in a position to qualify for its current fiscal year as a REIT
under the Code and its proposed methods of operation will enable it to so
qualify.
SECTION 3.14. Ownership of Projects, Minority Holdings and Property.
-----------------------------------------------------
Except with respect to encumbered Projects owned by special purpose entities
created for purposes of securitizing the mortgage loans encumbering the same,
ownership of all wholly owned Projects, Minority Holdings and other Property of
the Consolidated Businesses is held by the Borrower and its direct or indirect
wholly-owned Subsidiaries and is not held directly by the Company.
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date. The obligations of the Lenders to
--------------
make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall
not become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):
55
<PAGE>
(a) The Administrative Agent (or its counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement and all
other Loan Documents to which it is a party, signed on behalf of such party
or (ii) written evidence satisfactory to the Administrative Agent (which
may include telecopy transmission of a signed signature page of each such
Loan Document) that such party has signed a counterpart of this Agreement
and all other Loan Documents required to be delivered by the Administrative
Agent.
(b) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of Latham & Watkins, counsel for the Borrower,
substantially in the form of EXHIBIT E, and covering such other matters
---------
relating to the Borrower, the Company, this Agreement or the Transactions
as the Required Lenders shall reasonably request. The Borrower hereby
requests such counsel to deliver such opinion.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of the
Borrower and the Company, the authorization of the Transactions and any
other legal matters relating to the Borrower, the Company, and such
Subsidiaries, this Agreement or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a
Financial Officer of the General Partner, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 4.02.
(e) No change in the business, assets, management, operations, or
financial condition of the Borrower or any of its Properties shall have
occurred since September 30, 1997 which change, in the judgment of the
Administrative Agent, will have or is reasonably likely to have a Material
Adverse Effect.
(f) Except as disclosed to the Administrative Agent and the Lenders,
since September 30, 1997, neither the Borrower nor the Company shall not
have (i) entered into any (as determined in good faith by the
Administrative Agent) commitment or transaction, including, without
limitation, transactions for borrowings and capital expenditures, which are
not in the ordinary course of the Borrower's business, (ii) declared or
paid any dividends or other distributions, (iii) established compensation
or employee benefit plans, or (iv) redeemed or issued any Stock or Stock
Equivalents.
(g) Since September 30, 1997, no agreement or license relating to the
business, operations or employee relations of the Borrower or any of its
Properties shall have been terminated, modified, revoked, breached or
declared to be in default, the termination, modification, revocation,
breach or default under which, in the reasonable judgment of the
Administrative Agent, would result in a Material Adverse Effect.
(h) Since September 30, 1997, no material adverse change shall have
occurred
56
<PAGE>
in the conditions in the capital markets or the market for loan
syndications generally.
(i) The Administrative Agent shall have received all fees and other
amounts due and payable by the Borrower on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all
reasonable out-of-pocket expenses required to be reimbursed or paid by the
Borrower hereunder.
(j) The Administrative Agent shall have received (i) a Borrowing Base
Certificate, dated the Effective Date and signed by a Responsible Officer,
together with copies of the Eligible Project Documents in respect of each
of the Eligible Projects shown listed thereon, and (ii) a Compliance
Certificate, dated the Effective Date and signed by a Responsible Officer,
in each case reasonably satisfactory to the Administrative Agent.
(k) The Administrative Agent shall have received the Letter
Agreement.
(l) The Administrative Agent shall have received Mortgage Documents
in respect of each of the Initial Mortgaged Properties including, without
limitation, the payments specified in clause (g) of the definition of
Mortgaged Documents; provided that, notwithstanding clause (e) of the
-------- ----
definition of Mortgaged Documents, this clause (l) shall be deemed
satisfied on the Effective Date if the Administrative Agent shall have
received duly executed estoppel certificates and Subordination and
Attornment Agreements from tenants accounting for not less than 60% of the
aggregate base rental revenues from the Initial Mortgaged Properties (in
the case of Subordination and Attornment Agreements, when aggregated with
tenants of the Initial Mortgaged Properties who occupy the same under
Leases that are, by their terms, subject and subordinate to the Liens of
the respective mortgages encumbering the Initial Mortgaged Properties);
provided further that any further estoppel certificates and Subordination
-------- ------- ----
and Attornment Agreements in respect of the Initial Mortgaged Properties
necessary to fulfill the requirement of clause (e) of the definition of
Mortgaged Documents shall be delivered to the Administrative Agent no later
than 45 days after the date hereof.
(m) The Administrative Agent shall have received (i) the Guaranty
duly executed by the Company, (ii) the Security Agreement duly executed by
the Company, together with Financing Statements (Form UCC-1) under the
Uniform Commercial Code of all jurisdictions as may be necessary or, in the
reasonable opinion of the Administrative Agent, desirable to protect the
security interest created thereunder and (iii) each Subsidiary Guaranty,
duly executed by the Subsidiary Guarantor party thereto.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
SECTION 4.02. Each Credit Event. The obligation of each Lender to make
-----------------
a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of
the following conditions:
(a) The representations and warranties of the Borrower, the Company and each
57
<PAGE>
Subsidiary Guarantor set forth in any of the Loan Documents shall be true and
correct in all material respects on and as of the date of such Borrowing or
the date of issuance, amendment, renewal or extension of such Letter of
Credit, as applicable.
(b) At the time of and immediately after giving effect to such Borrowing
or the issuance, amendment, renewal or extension of such Letter of Credit,
as applicable, no Default or Event of Default shall have occurred and be
continuing.
(c) The Borrower has not received written notice from the Required Lenders
that an event has occurred since the date of this Agreement which has had, and
continues to have, or is reasonable likely to have, a Material Adverse Effect.
(d) The making of such Loan or the issuance, amendment, renewal or
extension of such Letter of Credit, as applicable, on such date does not
violate any Requirement of Law and is not enjoined, temporarily, preliminary
or permanently.
(e) The Administrative Agent shall have received a Borrowing Base
Certificate, dated as of the date of the proposed Borrowing and signed by the
President, a Vice President or a Financial Officer of the General Partner,
satisfactory to the Administrative Agent, together with (to the extent not
previously delivered) copies of the Eligible Project Documents in respect of
each Eligible Project listed thereon.
(f) In the event that such Loan is to be made or such Letter of Credit is
to be issued, amended, renewed or extended prior to the Conversion Date, the
Administrative Agent shall have received Mortgage Documents in respect of each
of the Eligible Projects included for purposes of the Borrowing Base,
including, without limitation, the payments specified in clause (g) of the
definition of Mortgaged Documents.
(g) The Administrative Agent shall not have received a Notice of Breach.
(h) The Administrative Agent shall have received such additional
documents, information and materials as any Lender, through the Administrative
Agent, may reasonably request.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE V
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that:
58
<PAGE>
SECTION 5.01. Financial Statements and Other Information. The Borrower will
------------------------------------------
furnish to the Administrative Agent and each Lender:
(a) Quarterly Reports.
-----------------
(i) Borrower Quarterly Financial Reports. As soon as practicable, and in any
------------------------------------
event within forty-five (45) days after the end of each fiscal quarter in each
Fiscal Year (other than the last fiscal quarter in each Fiscal Year), a
consolidated balance sheet of the Borrower and the related consolidated
statements of income, retained earnings and cash flow of the Borrower (to be
prepared and delivered quarterly in conjunction with the other reports delivered
hereunder at the end of each fiscal quarter) for each such fiscal quarter, in
each case in the same form as the statements accepted by the Administrative
Agent on the Effective Date and, in comparative form, the corresponding figures
for the corresponding periods of the previous Fiscal Year, certified by a
Financial Officer of the Borrower as fairly presenting the consolidated and
consolidating financial position of the Borrower as of the dates indicated and
the results of their operations and cash flow for the months indicated in
accordance with GAAP, subject to normal year end audit adjustments.
(ii) Company Quarterly Financial Reports. As soon as practicable, and in any
-----------------------------------
event within forty-five (45) days after the end of each fiscal quarter in each
Fiscal Year (other than the last fiscal quarter in each Fiscal Year), the
Financial Statements of the Company and its Subsidiaries on Form 10-Q as at the
end of such period and a report setting forth in comparative form the
corresponding figures for the corresponding period of the previous Fiscal Year,
certified by a Financial Officer of the Company as fairly presenting the
consolidated and consolidating financial position of the Company and its
Subsidiaries as at the date indicated and the results of their operations and
cash flow for the period indicated in accordance with GAAP, subject to normal
adjustments.
(iii) Quarterly Compliance Certificates. Together with each delivery of
---------------------------------
any quarterly report pursuant to paragraph (a)(i) of this Section 5.01, the
Borrower shall deliver (i) a Borrowing Base Certificate as of the end of such
fiscal quarter, executed by a Responsible Officer, together with (to the extent
not previously delivered) copies of the Eligible Project Documents in respect of
each of the Eligible Projects shown listed thereon, and (ii) a Compliance
Certificate as of the end of such fiscal quarter, executed by a Financial
Officer.
(iv) Quarterly Financial Statements With Respect to the Mortgaged Properties.
-----------------------------------------------------------------------
As soon as practicable and in any event within forty-five (45) days after the
end of each fiscal quarter in each Fiscal Year (other than the last fiscal
quarter in each Fiscal Year), a rent roll for each of the Mortgaged Properties
certified by a Financial Officer, together with a statement of gross revenues,
direct operating expenses, net income, capital expenditures, tenant improvements
and leasing commissions for each of the Mortgaged Properties as at the end of
such quarter, each of which statements shall (i) set forth in comparative form,
the figures for the corresponding periods during the previous Fiscal Year, (ii)
be prepared in reasonable detail and (iii) be certified by a Financial Officer
that they are complete and correct and that they fairly present the gross
revenues, direct operating expenses and net income of each such property as at
the end of such fiscal quarter, in accordance with GAAP (subject to normal,
year-end audit adjustments).
59
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(b) Annual Reports
--------------
(i) Borrower Financial Statements. As soon as practicable, and in any event
-----------------------------
within ninety (90) days after the end of each Fiscal Year, a consolidated
balance sheet of the Borrower and the related consolidated statements of income,
retained earnings and cash flow of the Borrower (to be prepared and delivered
annually in conjunction with the other reports delivered hereunder at the end of
each Fiscal Year) for each such Fiscal Year, in each case in the same form as
the statements accepted by the Administrative Agent on the Effective Date and,
in comparative form, the corresponding figures for the corresponding periods of
the previous Fiscal Year, certified by a Financial Officer of the Borrower as
fairly presenting the consolidated and consolidating financial position of the
Borrower as of the dates indicated and the results of their operations and cash
flow for the months indicated in accordance with GAAP, subject to normal year
end audit adjustments.
(ii) Company Financial Statements. As soon as practicable, and in any
----------------------------
event within ninety (90) days after the end of each Fiscal Year, the Financial
Statements of the Company and its Subsidiaries on Form 10-K as at the end of
such Fiscal Year and a report setting forth in comparative form the
corresponding figures from the consolidated Financial Statements of the Company
and its Subsidiaries for the prior Fiscal Year accompanied by a report thereon
of Deloitte & Touche or other independent certified public accountants
acceptable to the Administrative Agent, which report shall be unqualified as to
scope of audit and shall state that such financial statements fairly present the
consolidated financial position of the Company and its Subsidiaries as at the
dates indicated and the results of their operations and cash flow for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years (except for changes with which Deloitte & Touche or any such other
independent certified public accountants, if applicable, shall concur and which
shall have been disclosed in the notes to the financial statements)(which report
shall be subject to the confidentiality limitations set forth herein); and (iii)
in the event that the report referred to in clause (ii) above is qualified, a
copy of the management letter or any similar report delivered to the Company or
to any officer or employee thereof by such independent certified public
accountants in connection with such financial statements. The Administrative
Agent and each Lender (through the Administrative Agent) may, with the consent
of the Company (which consent shall not be unreasonably withheld), communicate
directly with such accountants, with any such communication to occur together
with a representative of the Company, at the expense of the Administrative Agent
(or the Lender requesting such communication), upon reasonable notice and at
reasonable times during normal business hours.
(iii) Annual Compliance Certificates. Together with each delivery of any
------------------------------
annual report pursuant to clauses (i) and(ii) of this Section 5.01(b), the
Borrower shall deliver a Compliance Certificate as of the end of such Fiscal
Year, executed by a Financial Officer.
(iv) Tenant Bankruptcy Reports. As soon as practicable, and in any event
-------------------------
within ninety (90) days after the end of each Fiscal Year, the Borrower shall
deliver a written report, in form reasonably satisfactory to the Administrative
Agent, of all bankruptcy proceedings filed by or against any tenant of any of
the Projects, which tenant occupies two percent (2%) or more of the gross
leasable area in the Projects in the aggregate. The Borrower shall deliver to
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the Administrative Agent and the Lenders, immediately upon the Borrower's
learning thereof, of any bankruptcy proceedings filed by or against, or the
cessation of business or operations of, any tenant of any of the Projects which
tenant occupies two percent (2%) or more of the gross leasable area in the
Projects in the aggregate.
(v) Annual Financial Statements With Respect to the Mortgaged Properties.
--------------------------------------------------------------------
As soon as practicable and in any event within ninety (90) days after the end of
each Fiscal Year a rent roll for each of the Mortgaged Properties, together with
a statement of gross revenues, direct operating expenses, net income, capital
expenditures, tenant improvements and leasing commissions for each of the
Mortgaged Properties for such Fiscal Year, in each case certified by a Financial
Officer, together with an audited statement of gross revenues and direct
operating expenses for each of the Properties for such Fiscal Year, each of
which audited statements shall (i) set forth in comparative form, the figures
for gross income and direct operating expenses for the previous Fiscal Year;
provided that a comparative form shall not be required for the audited
- -------- ----
statements delivered for the Fiscal Year 1997, (ii) be prepared in reasonable
detail, (iii) be accompanied by a report thereon of Deloitte & Touche or other
independent public accountants of comparable recognized national standing
acceptable to the Lender, (iv) be unqualified as to scope of audit and (v) state
that such consolidated statement presents fairly the gross revenues and direct
operating expenses as at the end of such Fiscal Year of each such statement in
accordance with GAAP.
(c) Concurrently with any delivery of financial statements under clause (a)
or (b) above, a certificate of a Financial Officer of the Borrower (i)
certifying as to whether a Default has occurred and is continuing and, if a
Default has occurred and is continuing, specifying the details thereof and any
action taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections 6.01(a)
or (b), as applicable and (iii) stating whether any change in GAAP or in the
application thereof has occurred since the date of the audited financial
statements referred to in Section 3.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate;
(d) Intentionally Deleted;
(e) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of the Borrower or any
Subsidiary, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request.
SECTION 5.02. Notices of Material Events. (a) The Borrower will furnish to
--------------------------
the Administrative Agent and each Lender prompt written notice of the following:
(i) the occurrence of any Default;
(ii) the filing or commencement of any action, suit or proceeding
by or before any arbitrator or Governmental Authority against or affecting
the Borrower or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
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(iii) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in a Material Adverse Effect; and
(iv) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
(b) The Borrower shall deliver to the Administrative Agent and the Lenders
written notice of each of the following not less than five (5) Business Days
after the occurrence thereof: (a) a sale, transfer or other disposition of
assets, in a single transaction or series of related transactions, for
consideration in excess of $10,000,000, (b) an acquisition of assets, in a
single transaction or series of related transactions, for consideration in
excess of $20,000,000, and (c) the grant of a Lien with respect to assets, in a
single transaction or series of related transactions, in connection with
Indebtedness aggregating an amount in excess of $20,000,000. Simultaneously
with delivery of any such notice, the Borrower shall be deemed to have
represented and warranted to the Administrative Agent that Borrower is in
compliance with this Agreement and the other Loan Documents both on a historical
basis and on a pro forma basis, exclusive of the property sold, transferred
and/or encumbered and inclusive of the property to be acquired or the
indebtedness to be incurred. To the extent such proposed transaction would
result in a failure to comply with the financial covenants set forth herein,
proceeds of such transaction (together with such additional amounts as may be
required), in an amount, as determined by the Administrative Agent, equal to
that which would be required to reduce the Obligations so that Borrower will be
in compliance with the covenants set forth herein upon the consummation of the
contemplated transaction, shall be applied to prepay the Obligations.
(c) The Borrower shall promptly notify the Administrative Agent upon
obtaining knowledge of the bankruptcy or cessation of substantially all of the
operations of any tenant to which greater than two percent (2%) of the
Borrower's share of consolidated minimum rent is attributable.
(d) promptly and in any event within ten days of the Borrower or any
Subsidiary learning of any of the following, written notice to the
Administrative Agent of any of the following:
(i) the Release of any Hazardous Material on or from any
property owned or leased by the Borrower of any of its Subsidiaries or
Eligible Minority Holdings and any written order, notice, permit,
application or other written communication or report received by the
Borrower, any of its Subsidiaries or Eligible Minority Holdings in
connection with or relating to any such Release, unless such Release is not
reasonably likely to subject the Borrower or any of its Subsidiaries to
Environmental Liabilities and Costs which would have a Material Adverse
Effect;
(ii) any notice or claim to the effect that the Borrower, any
of its Subsidiaries or any Eligible Minority Holdings is or may be liable
to any Person as a result of the Release or threatened Release of any
Hazardous Material into the environment which liability would have a
Material Adverse Effect;
62
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(iii) receipt by the Borrower, any of its Subsidiaries or
Eligible Minority Holdings or any Operator of notification that any real or
personal property of the Borrower or any of its Subsidiaries is subject to
an Environmental Lien;
(iv) any Remedial Action taken by the Borrower or any of its
Subsidiaries or Eligible Minority Holdings or any other Person on their
behalf in response to any Hazardous Material on, under or about any Real
Property owned or leased by the Borrower or any of its Subsidiaries or
Eligible Minority Holdings, unless such Remedial Action is not reasonably
likely to subject the Borrower or any of its Subsidiaries or Eligible
Minority Holdings to Environmental Liabilities and Costs which would have a
Material Adverse Effect;
(v) receipt by the Borrower or any of its Subsidiaries or
Eligible Minority Holdings of any notice of violation of, or knowledge by
the Borrower or any of its Subsidiaries or any Eligible Minority Holdings
that there exists a condition which may result in a violation by the
Borrower or any of its Subsidiaries or Eligible Minority Holdings of, any
Environmental Law, unless such violation is not reasonably likely to
subject the Borrower or any of its Subsidiaries to Environmental
Liabilities and Costs which would have a Material Adverse Effect;
(vi) any proposed Capital Expenditure by the Borrower or any of
its Subsidiaries or Eligible Minority Holdings intended or designed to
implement any existing or additional Remedial Action, unless such
expenditures are not reasonably likely to have a Material Adverse Effect;
(vii) the commencement of any judicial or administrative
proceeding or investigation alleging a violation of any Environmental Law;
or
(viii) any proposed acquisition of stock, assets or Real
Property, or any proposed leasing of property by the Borrower, or any of
its Subsidiaries or Eligible Minority Holdings, unless such action is not
reasonably likely to subject the Borrower and its Subsidiaries to
Environmental Liabilities and Costs to the Borrower which would have a
Material Adverse Effect; and
(e) promptly, such additional financial and other information respecting the
financial or other condition of the Borrower or any of its Subsidiaries or
Eligible Minority Holdings or the status or condition of any Real Property owned
or leased by the Borrower or its Subsidiaries or Eligible Minority Holdings, or
the operation thereof which the Borrower is entitled to or can otherwise
reasonably obtain, as the Administrative Agent from time to time reasonably
requests; and
(f) upon written request by any Lender through the Administrative Agent, a
report providing an update of the status of any Environmental Claim, Remedial
Action or any other issue identified in any notice or report required pursuant
to this Section 5.02
Each notice delivered under this Section shall be accompanied by a statement of
a Financial
63
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Officer or other executive officer of the Borrower setting forth the details of
the event or development requiring such notice and any action taken or proposed
to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will
------------------------------
cause each of its Subsidiaries to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business.
SECTION 5.04. Payment of Obligations. The Borrower will, and will cause
----------------------
each of its Subsidiaries to, pay its obligations, including Tax liabilities,
that, if not paid, could result in a Material Adverse Effect before the same
shall become delinquent or in default, except where (a) the validity or amount
thereof is being contested in good faith by appropriate proceedings, (b) the
Borrower or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and
------------------------------------
will cause each of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, and (b) maintain, with financially sound and
reputable insurance companies, insurance in such amounts and against such risks
as are listed on Schedule 3.12 or substantially similar policies and programs as
are acceptable to the Administrative Agent. Notwithstanding the foregoing (i)
the Borrower will, on or before January 15, 1998, deliver to the Administrative
Agent evidence satisfactory to the Administrative Agent that the earthquake
insurance coverage listed on Schedule 3.12 has been increased by at least $20
million, and (ii) the Administrative Agent shall be entitled to review, on an
annual basis, the earthquake insurance coverage maintained by the Borrower and
its Subsidiaries and the probable maximum loss values in connection therewith,
and to require such additional insurance coverage as the Administrative Agent
shall determine, in its reasonable discretion, is required based on such review.
SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and
------------------------------------
will cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, unless an Event of Default has occurred
and is continuing, at the expense of any such Lender, upon reasonable prior
notice and during normal business hours, to visit and inspect its properties, to
examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants,
all at such reasonable times and as often as reasonably requested.
SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each
--------------------
of its Subsidiaries to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
64
<PAGE>
SECTION 5.08. Use of Proceeds and Letters of Credit. No part of the
-------------------------------------
proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations G, U and X. Letters of Credit will be issued only to
support performance obligations or escrow deposits or as additional support for
other operating purposes and partial credit enhancements for Indebtedness. The
proceeds of the Loans, will be used only for the purposes of:
(a) acquisition of retail Projects similar to and consistent with the types
of Projects owned and/or operated by the Borrower on the Effective Date, located
in the following states: Washington, California, Oregon, Arizona, Nevada, Utah
or Idaho; and
(b) refinancing of existing Indebtedness for borrowed money secured by
Projects;
(c) redevelopment of Projects; and
(d) general corporate purposes of the Borrower and its Subsidiaries; provided
--------
that no more than 10% of the Available Credit shall be used for such purpose at
- ----
any time.
SECTION 5.09. Company Status. The Company shall at all times (1) remain a
--------------
publicly traded company listed on the American Stock Exchange; (2) retain direct
or indirect management and control of the Borrower, and (3) operate its business
at all times so as to satisfy all requirements necessary to qualify as an
equity-oriented REIT under the Code. The Company will maintain adequate records
so as to comply with all record-keeping requirements relating to the
qualification of the Company as an equity-oriented REIT as required by the Code
and applicable regulations of the Department of the Treasury promulgated
thereunder and will properly prepare and timely file with the IRS all returns
and reports required thereby. The Company will request from its shareholders all
shareholder information required by the Code and applicable regulations of the
Department of Treasury promulgated thereunder.
SECTION 5.10. Ownership of Projects, Minority Holdings and Property. The
-----------------------------------------------------
ownership of substantially all wholly owned Projects, Minority Holdings and
other Property of the Consolidated Businesses shall be held by the Borrower and
its Subsidiaries and shall not be held directly by the Company.
SECTION 5.11. Intentionally Deleted.
---------------------
SECTION 5.12. Environmental Matters. (a) The Borrower shall comply and
---------------------
shall cause each of its Subsidiaries and Eligible Minority Holdings and each
property owned or leased by such parties to comply in all material respects with
all applicable Environmental Laws currently or hereafter in effect.
(b) If Administrative Agent or Lenders at any time have a reasonable basis to
believe that there may be a material violation of any Environmental Law by the
Borrower or any of its Subsidiaries and Eligible Minority Holdings related to
any Real Property owned or leased by the Borrower or any of its Subsidiaries and
Eligible Minority Holdings, or Real Property
65
<PAGE>
adjacent to such Real Property, then the Borrower agrees, upon request from the
Administrative Agent, to provide the Administrative Agent, at the Borrower's
expense, with such reports, certificates, engineering studies or other written
material or data as the Administrative Agent or Lenders may reasonably require
so as to reasonably satisfy the Administrative Agent and Lenders that the
Borrower or such Subsidiary, Eligible Minority Holding or Real Property owned or
leased by them is in material compliance with all applicable Environmental Laws.
Furthermore, Administrative Agent shall have the right to inspect during normal
business hours any Real Property owned or leased by the Borrower or any of its
Subsidiaries or Eligible Minority Holdings if at any time Administrative Agent
or Lenders have a reasonable basis to believe that there may be such a material
violation of Environmental Law.
(c) The Borrower shall, and shall cause each of its Subsidiaries and Eligible
Minority Holdings to, take such Remedial Action or other action as required by
Environmental Laws, as any Governmental Authority requires, except to the extent
contested in good faith and by proper proceedings, or as is appropriate and
consistent with good business practice.
SECTION 5.13. Borrowing Base Determination/ Requirements. (a) As of the
------------------------------------------
Effective Date, the Administrative Agent and the Lenders have accepted the
Projects listed on Schedule 5.13 as Eligible Projects for the purposes of the
-------- ----
Borrowing Base as of the Effective Date, provided that the parties acknowledge
-------- ----
and agree that:
(i) Borrower owns only a ground leasehold interest in the Media City Center
Project, but the Administrative Agent and the Lenders have agreed, as a one time
waiver only, to accept such Project as an Eligible Project;
(ii) the Montebello Project has a PML of more than 20% of the replacement
cost thereof, but the Administrative Agent and the Lenders have agreed, as a one
time waiver only, to accept such Project as an Eligible Project; and
(iii) the Ross Center, Pacific Linen and Vancouver Park Projects each have a
PML of more than 20% of their respective replacement costs, but the
Administrative Agent and the Lenders have agreed, as a one time waiver only and
only prior to the Conversion Date, (y) to accept such Projects as Eligible
Projects at such time as their respective PMLs are reduced to 22% or less of
their respective replacement costs, and (z) until such time as clause (y) is
satisfied the Borrowing Base at any time prior to the Conversion Date shall be
defined as the sum of 50% of the Aggregate Value of the Ross Center, Pacific
Linen and Vancouver Park Projects (provided such Projects otherwise qualify as
Eligible Projects) plus 65% of the Aggregate Value of the other Mortgaged
Properties at such time.
(b) If the Borrower desires that the Administrative Agent accept an
additional Project as an Eligible Project for the purposes of the Borrowing
Base, the Borrower shall so notify the Administrative Agent in writing and, if
such notification is given prior to the Conversion Date deliver to the
Administrative Agent a duly executed and completed due diligence request form in
the form attached as EXHIBIT I hereto. Prior to the Conversion Date, in lieu of
------- -
the Administrative Agent ordering the environmental reports and building
condition survey as contemplated by such form, the Administrative Agent will
accept environmental reports and building condition surveys prepared by
consultants approved by the Administrative
66
<PAGE>
Agent (a list of initially approved environmental consultants and initially
approved building condition consultants is attached hereto as EXHIBIT J)
------- -
provided such reports or surveys comply with the Administrative Agent's
- --------
requirements as to scope of work as set forth on EXHIBIT K hereto and the
------- -
Administrative Agent receives reliance letters (in the form attached as EXHIBIT
-------
L hereto or otherwise in form and substance reasonably acceptable to the
- -
Administrative Agent) in favor of the Administrative Agent, the Lenders and
their respective successors and assigns, and holders of any participation
interests in the Loan. The Administrative Agent's acceptance of such Project in
the Borrowing Base shall not be unreasonably withheld, conditioned or delayed,
provided such Project shall meet the requirements for Eligible Projects
- --------
specified herein and provided further that a Project shall not be accepted as an
-------- ------- ----
Eligible Project unless and until the Borrower has delivered to the
Administrative Agent (i) prior to the Conversion Date, Mortgage Documents in
respect of such Project including, without limitation, the payments specified in
clause (g) of the definition of Mortgage Documents, and (ii) the Eligible
Project Documents relating to such Project in form and substance reasonably
satisfactory to the Administrative Agent. From and after the Conversion Date, in
the event that the Administrative Agent accepts a Project as an Eligible Project
based on Borrower's representations set forth in the Borrowing Base Certificate
but later determines that such Project does not comply with the requirements set
forth herein for Eligible Projects, then the Administrative Agent may so notify
the Borrower and the Borrower shall repay any Borrowing Base Imbalance as
required pursuant to Section 2.11(d) and, if so repaid, the representation
regarding such Project contained in the Borrowing Base Certificate shall be
deemed withdrawn. Notwithstanding the foregoing, a Project may, with the
approval of the Required Lenders, be accepted as an Eligible Project
notwithstanding that it shall fail to meet the requirements for Eligible
Projects specified herein.
(c) The Borrower shall promptly notify the Administrative Agent in writing in
the event that at any time the Borrower or any of its Subsidiaries receives or
otherwise gains knowledge that (i) any Project included in a prior Borrowing
Base Certificate as an Eligible Project, ceases, for any reason whatsoever, to
be an Eligible Project, or (ii) that the Aggregate Value of the Eligible Project
is less than 90% of the Aggregate Value for such Eligible Project reflected in
the most recent Borrowing Base Certificate delivered pursuant hereto, or (iii)
the Loans and LC Exposure, outstanding at such time exceed the lower of the then
effective Commitments or the Borrowing Base at such time as a result of any
decrease in the Borrowing Base, and the amount of such excess. In the event of
a Borrowing Base Imbalance, the Borrower shall prepay the Loans or a portion
thereof as required pursuant to Section 2.11(d).
(d) The Administrative Agent, at the expense of the Lenders (but such expense
to be reimbursed by the Borrower in the event that a Project fails to meet
requirements for an Eligible Project in any material respect) may make physical
and other verifications of any Projects included as Eligible Projects in any
reasonable manner and through any medium that the Administrative Agent considers
advisable, and the Borrower shall furnish all such assistance and information as
the Administrative Agent may require in connection therewith.
(e) At all times prior to the Conversion Date, there shall be not less than
five (5) Mortgaged Properties included in the Collateral.
(f) The Administrative Agent shall have the right, at the expense of the
Borrower, to require reappraisals of the Mortgaged Properties if the same are
required pursuant
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to a Requirement of Law, provided that no more than one reappraisal shall be
-------- ----
required in any twelve (12) month period.
(g) Notwithstanding anything to the contrary set forth herein, a Project
shall cease to be an Eligible Project if it shall cease to comply with the
requirements therefor set forth herein.
SECTION 5.14. Equity Infusion Requirement. The Borrower shall cause the
---------------------------
Company to comply with its obligations set forth in Section 4 of the Security
Agreement.
ARTICLE VI
Negative Covenants
------------------
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, the Borrower covenants and agrees with the Lenders
that:
SECTION 6.01. Indebtedness and Other Financial Covenants.
------------------------------------------
(a) Prior to the Conversion Date. For the period from and after the
----------------------------
Effective Date until the Conversion Date:
(i) Limitations on Indebtedness. Neither the Borrower nor
---------------------------
any of its Subsidiaries shall directly or indirectly create, incur, assume
or otherwise become or remain directly or indirectly liable with respect to
any Indebtedness, except Indebtedness which, when aggregated with
Indebtedness of the Borrower or any of its Subsidiaries and Minority
Holdings Indebtedness allocable in accordance with GAAP to the Borrower or
any Subsidiary of the Borrower, would not exceed, at any time (A) during
the first and second Loan Years, seventy-five percent (75%) of Total Value,
and (B) thereafter, sixty percent (60%) of Total Value ("Total Outstanding
-----------------
Indebtedness Limitation"). In addition, except in its capacity as the
------------------------
General Partner, the Company shall not incur, directly or indirectly, any
Indebtedness other than the Guaranty.
(ii) Minimum Facility Interest Coverage Ratio. As of the
----------------------------------------
first day of each calendar quarter for the immediately preceding calendar
quarter, the ratio of (y) the aggregate sum of Adjusted NOI from the
Mortgaged Properties, to (z) Facility Interest Expense for such quarter
shall not be less than 1.75 to 1.00.
(iii) Minimum Fixed Charge Coverage Ratio. As of the first
-----------------------------------
day of each calendar quarter for the immediately preceding calendar
quarter, the ratio of (A) Total Adjusted EBITDA, to (B) Fixed Charges shall
not be less than (x) during the first Loan Year, 1.30 to 1.00, (y) during
the Second Loan Year 1.50 to 1.00, and (z) thereafter, 1.75 to 1.00.
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(b) From and After the Conversion Date. For the period from and after
----------------------------------
the Conversion Date:
(i) Limitation on Indebtedness. Neither the Borrower nor any
--------------------------
of its Subsidiaries shall directly or indirectly create, incur, assume or
otherwise become or remain directly or indirectly liable with respect to
any Indebtedness, except Indebtedness which, when aggregated with
Indebtedness of the Borrower or any of its Subsidiaries and Minority
Holdings Indebtedness allocable in accordance with GAAP to the Borrower or
any Subsidiary of the Borrower, would not exceed, at any time, (A) fifty-
five percent (55%) of Total Value ("Total Outstanding Indebtedness
------------------------------
Limitation"), or (B) in the case of Secured Indebtedness of the
----------
Consolidated Businesses and the Borrower's proportionate share of Secured
Indebtedness of its Minority Holdings, thirty-five percent (35%) of the
Total Value ("Total Secured Outstanding Indebtedness Limitation"), or (C)
-------------------------------------------------
in the case of Secured Recourse Indebtedness, the lesser of (y) ten percent
(10%) of the Total Value, and (z) $100,000,000 ("Total Secured Outstanding
-------------------------
Recourse Indebtedness Limitation"). In addition, any Secured Indebtedness
--------------------------------
of the Consolidated Businesses and of the Borrower's Minority Holdings that
is not Non-Recourse Indebtedness shall not exceed seventy-five percent
(75%) of the appraised value of the collateral therefor as at the date of
incurrence of such Secured Indebtedness. Except in its capacity as General
Partner, the Company shall not incur, directly or indirectly, any
Indebtedness other than the Guaranty.
(ii) Minimum Combined Equity Value. The Combined Equity Value
-----------------------------
shall at no time be less than eighty-five percent (85%) of the Combined
Equity Value as at the Conversion Date, plus an amount equal to eighty-five
percent (85%) of all Net Offering Proceeds received by the Company after
the Conversion Date.
(iii) Minimum Senior Unsecured Interest Coverage Ratio. As of
------------------------------------------------
the first day of each calendar quarter for the immediately preceding
calendar quarter, the ratio of (A) the sum of Total Adjusted Unencumbered
NOI, to (B) Unsecured Interest Expense on Senior Unsecured Indebtedness for
such quarter shall not be less than 2.00 to 1.00.
(iv) Minimum Unsecured Interest Coverage Ratio. As of the
-----------------------------------------
first day of each calendar quarter for the immediately preceding calendar
quarter, the ratio of (A) Total Adjusted Unencumbered NOI to (B) Unsecured
Interest Expense shall not be less than 1.75 to 1.00.
(v) Minimum Fixed Charge Coverage Ratio. As of the first day
-----------------------------------
of each calendar quarter for the immediately preceding calendar quarter,
the ratio of (A) Total Adjusted EBITDA, to (B) Fixed Charges shall not be
less than 1.75 to 1.00.
(vi) Maximum Dividend Payout Ratio. The Company shall not make
-----------------------------
any Restricted Payment during any of its fiscal quarters, which, when added
to all Restricted Payments made during the three immediately preceding
fiscal quarters, exceeds the greater of (A) 90% of FFO, and 100% of FAD,
and (B) the amounts required to maintain its status as a REIT under the
Code. For purposes of this provision, "Re-
69
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stricted Payment" means (A) any dividend or other distribution on any
shares of the Company's capital stock (except dividends payable solely in
shares of its capital stock or in rights to subscribe for or purchase
shares of its capital stock), or (B) any payment on account of the
purchase, redemption, retirement or acquisition of (1) any shares of the
Company's capital stock, or (2) any option, warrant or other right to
acquire shares of the Company's capital stock, provided that "Restricted
-------- ----
Payment" shall not include any payments required to be made by the
Company pursuant to the Haagen Agreement.
(c) Negative Pledge. From and after the date hereof, neither the Borrower
---------------
nor the Company will, and will not permit any Subsidiary, to enter into
any agreement containing any provision prohibiting the creation or
assumption of any Lien upon any Eligible Projects, or restricting the
ability of the Borrower to amend or modify this Agreement or any other
Loan Document.
(d) Pro Forma Calculations. The Borrower shall comply with the financial
----------------------
ratios set forth in this Section 6.01 as of the date of each Borrowing.
The Borrower shall recalculate the financial ratios by adding the deemed
amount equal to the Borrowing to the Indebtedness reflected on the most
recently available financial statements, and adding thereto any
Indebtedness incurred since the date of such financial statement and
adding thereto the value of such assets (determined at cost) acquired
with such Indebtedness to Total Value. The Borrower shall deliver a
Compliance Certificate, signed by the Borrower representing and
certifying that the pro forma calculations as of the date of the draw
--- -----
demonstrate Borrower's compliance with the covenants and financial ratios
set forth in this Section 6.01.
SECTION 6.02. Liens. The Borrower will not, and will not permit any
-----
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Permitted Encumbrances;
(b) Liens with respect to Capital Leases of Equipment entered into in the
ordinary course of business of the Borrower pursuant to which the
aggregate Indebtedness under such Capital Leases does not exceed
$5,000,000 for any Project; and
(c) Liens securing Secured Indebtedness comprising, as of the date hereof,
the Liens securing the Secured Indebtedness set forth on Schedule 3.04,
-------------
subject to the limitations in Section 6.01(b).
SECTION 6.03. Fundamental Changes. (a) The Borrower will not, and will not
-------------------
permit any Subsidiary to, merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or sell, transfer,
lease or otherwise dispose of (in one transaction or in a series of
transactions) all or substantially all of its assets (in each case, whether now
owned or hereafter acquired), or liquidate or dissolve, except (i) in connection
with the issuance transfer, conversion or repurchase of limited partnership
interests in Borrower, and (ii) if at the time thereof and immediately after
giving effect thereto no Default shall have
70
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occurred and be continuing (x) any Person may merge into the Borrower in a
transaction in which the Borrower is the surviving corporation and (y) any
Person may merge into any Subsidiary in a transaction in which the surviving
corporation is a Subsidiary.
(b) The Borrower will not, and will not permit any of its Subsidiaries to,
engage to any material extent in any business other than businesses of the type
conducted by the Borrower and its Subsidiaries on the date of execution of this
Agreement and businesses reasonably related thereto.
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The
---------------------------------------------------------
Borrower will not, and will not permit any of its Subsidiaries to, purchase,
hold or acquire (including pursuant to any merger with any Person that was not a
wholly owned Subsidiary prior to such merger) any capital stock, evidences of
indebtedness or other securities (including any option, warrant or other right
to acquire any of the foregoing) of, make or permit to exist any loans or
advances to, Guarantee any obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any other
Person constituting a business unit, except:
(a) Permitted Investments;
(b) Investments in Real Property; provided that (i) the aggregate Investments
-------------
by the Borrower and its consolidated Subsidiaries in unimproved Real Property
and Properties under construction shall not exceed 10% of Total Value, and (ii)
Projects that are not located in the States of Washington, California, Oregon,
Arizona, Nevada, Utah or Idaho, shall not exceed 10% of Total Value;
(c) Investments (including loans) in the Borrower's Subsidiaries; provided
--------
that the Borrower shall not create or acquire any direct or indirect wholly-
- ----
owned Subsidiary which owns any Project that is Unencumbered after the Effective
Date unless, concurrently with the creation or acquisition thereof, such
Subsidiary executes and delivers to the Administrative Agent a Subsidiary
Guaranty;
(d) Investments in Minority Holdings; provided that the aggregate Investments
-------------
of the type set forth in this clause (d) shall not exceed 20% of Total Value;
(e) Investments in notes secured by mortgages on any Real Property of any
Person; provided that the aggregate Investments of the type set forth in this
-------------
clause (e) shall not exceed 10% of Total Value; and
(f) additional Investments in an amount outstanding at any time not to exceed
$10,000,000.
SECTION 6.05. Hedging Agreements. The Borrower will not, and will not
------------------
permit any of its Subsidiaries to, enter into any Hedging Agreement, other than
Hedging Agreements entered into in the ordinary course of business to hedge or
mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct
of its business or the management of its liabilities.
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SECTION 6.06. Transactions with Affiliates. Neither the Borrower nor any
----------------------------
of its Subsidiaries shall directly or indirectly enter into or permit to exist
any transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any holder or
holders of more than five percent (5%) of any class of equity Securities of the
Borrower, or with any Affiliate of the Borrower which is not its Subsidiary, on
terms less favorable to the Borrower or any of its Subsidiaries, as applicable,
than those that might be obtained in an arm's length transaction at the time
from Persons who are not such a holder or Affiliate. Nothing contained in this
Section 6.06 shall prohibit (a) increases in compensation and benefits for
officers and employees of the Borrower or any of its Subsidiaries which are
customary in the industry or consistent with the past business practice of the
Borrower or such Subsidiary, provided that no Event of Default or Default has
-------- ----
occurred and is continuing; (b) payment of customary partners' indemnities; or
(c) performance of any obligations arising under the Loan Documents or (d) the
performance by the Company and the Borrower of their obligations under the
Lazard Agreements.
SECTION 6.07. Intentionally Deleted.
---------------------
SECTION 6.08. Margin Regulations; Securities Laws. Neither the Borrower
-----------------------------------
nor any of its Subsidiaries, shall use all or any portion of the proceeds of any
credit extended under this Agreement to purchase or carry Margin Stock.
SECTION 6.09. Negative Covenants of the Company.
---------------------------------
(a) The Company will not acquire any assets of any nature whatsoever, other
than additional units in the Borrower.
(b) From and after the date hereof, the Company will not incur any
Indebtedness or any other obligations or liabilities except (x) in its capacity
as the general partner of the Borrower in connection with transactions entered
into in the ordinary course of business, and (y) Indebtedness, the net proceeds
of which are contributed to the Borrower simultaneously with the incurrence
thereof by the Company.
(c) From and after the date hereof, the Company will not retain any Net
Offering Proceeds, and the same will be contributed by the Company to the
Borrower simultaneously with receipt thereof by the Company.
(d) The Company shall not enter into any merger or consolidation, or
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or
convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, any of its business or assets, including its interests
in the Borrower. Notwithstanding the foregoing, the Company shall be permitted
to merge with another Person so long as the Company is the surviving Person
following such merger.
SECTION 6.10. Environmental Matters. (a) The Borrower shall not, and shall
---------------------
not permit any of its Subsidiaries or Eligible Minority Holdings or, to the
extent reasonably practicable, any other Person to dispose of any Hazardous
Material in violation of any
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Environmental Laws by placing it in or on the ground or waters of any property
owned or leased by the Borrower or any of its Subsidiaries or Eligible Minority
Holdings.
(b) The Borrower shall not, and shall not permit any of its Subsidiaries or
Eligible Minority Holdings, or, to the extent practicable, authorize any other
Person to, dispose or to arrange for the disposal of any Hazardous Material on
behalf of the Borrower or any of its Subsidiaries or Eligible Minority Holdings
except in material compliance with all applicable Environmental Laws currently
and hereinafter in effect.
ARTICLE VII
Events of Default
-----------------
If any of the following events ("Events of Default") shall occur:
-----------------
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement or any other Loan Document, when and
as the same shall become due and payable, and such failure shall continue
unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or on behalf
of the Borrower or any Subsidiary in or in connection with this Agreement
or any other Loan Document or any amendment or modification hereof or
thereof or waiver hereunder or thereunder, or in any report, certificate,
financial statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof or
waiver hereunder, shall prove to have been incorrect in any material
respect when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Article VI;
(e) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement or any other Loan
Document (other than those specified in clause (a), (b) or (d) of this
Article), and such failure shall continue unremedied for a period of 30
days after written notice thereof from the Administrative Agent to the
Borrower (which notice will be given at the request of any Lender);
(f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) and such
failure shall continue beyond
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any applicable grace period in respect of any Material Indebtedness, when
and as the same shall become due and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits the holder or holders of any Material Indebtedness or any
trustee or agent on its or their behalf to cause any Material Indebtedness
to become due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity; provided that this
-------- ----
clause (g) shall not apply to secured Indebtedness that becomes due as a
result of the voluntary sale or transfer of the property or assets securing
such Indebtedness unless prohibited by this Agreement;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Company, the Borrower or any Subsidiary or its
debts, or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Company,
the Borrower or any Subsidiary or for a substantial part of its assets,
and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of
the foregoing shall be entered;
(i) the Company, the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding or petition described in clause (h)
of this Article, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for the Company, the Borrower or any Subsidiary or for a substantial part
of its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Company, the Borrower or any Subsidiary shall become unable,
admit in writing or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $10,000,000 shall be rendered against the Borrower, any
Subsidiary or any combination thereof and, except to the extent payment of
the same shall be covered by insurance, the same shall remain undischarged
for a period of 30 consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any
Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that have
occurred, could
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reasonably be expected to result in a Material Adverse Effect;
(m) a Change in Control shall occur;
(n) an event shall occur which has a Material Adverse Effect;
(o) the Company shall fail to (i) maintain its status as a REIT for
federal income tax purposes, (ii) continue as a general partner of the
Borrower, (iii) comply with all Requirements of Law applicable to it and
its businesses and Properties, in each case where the failure to so comply
individually or in the aggregate will have or is reasonably likely to have
a Material Adverse Effect, (iv) remain listed on the American Stock
Exchange, or (v) file all tax returns and reports required to be filed by
it with any Governmental Authority as and when required to be filed or to
pay any taxes, assessments, fees or other governmental charges upon it or
its Property, assets, receipts, sales, use, payroll, employment, licenses,
income, or franchises which are shown in such returns, reports or similar
statements to be due and payable as and when due and payable, except for
taxes, assessments, fees and other governmental charges (A) that are being
contested by the Company in good faith by an appropriate proceeding
diligently pursued, (B) for which adequate reserves have been made on its
books and records, and (C) the amounts the non-payment of which would not,
individually or in the aggregate, result in a Material Adverse Effect and
such failure under this clause (v), to the extent curable, shall remain
uncured for a period of thirty (30) days after notice thereof from the
Administrative Agent to the Borrower;
(p) the Company shall merge or liquidate with or into any other Person
and, as a result thereof and after giving effect thereto, (i) the Company
is not the surviving Person or (ii) such merger or liquidation would effect
an acquisition of or Investment in any Person not otherwise permitted under
the terms of this Agreement;
(q) the Borrower or any of its Subsidiaries shall have entered into
any consent or settlement decree or agreement or similar arrangement with
an Governmental Authority or any judgment, order, decree or similar action
shall have been entered against the Borrower or any of its Subsidiaries, in
each case based on or arising from the violation of or pursuant to any
Environmental Law, or the generation, storage, transportation, treatment,
disposal or Release of any Hazardous Material and, in connection with all
the foregoing, the Borrower and its Subsidiaries are likely to incur
Environmental Liabilities and Costs which would have a Material Adverse
Effect; or
(r) the Equity Infusion shall not have occurred by the outside dates
provided in Section 4 of the Security Agreement;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
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<PAGE>
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower; and
in case of any event with respect to the Borrower described in clause (h) or (i)
of this Article, the Commitments shall automatically terminate and the principal
of the Loans then outstanding, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower. In
addition to the remedies set forth above, the Administrative Agent may exercise
any remedies provided for in the Collateral Documents, if any, or by applicable
law.
ARTICLE VIII
The Administrative Agent
------------------------
Each of the Lenders and the Issuing Bank hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein. Without limiting the generality of the foregoing,
(a) the Administrative Agent shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) the Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated hereby that the Administrative Agent is required
to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02) or in the absence of its own gross negligence or
willful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire
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<PAGE>
into (i) any statement, warranty or representation made in or in connection with
this Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not incur
any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative Agent
as provided in this paragraph, the Administrative Agent may resign at any time
by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
provided that, if an Event of Default is not continuing, such appointment shall
- -------- ----
be subject to the consent of the Borrower, such consent not to be unreasonably
withheld, conditioned or delayed. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Bank, appoint a successor Administrative Agent which shall be a bank with an
office in New York, New York, or an Affiliate of any such bank. Upon the
acceptance of its appointment as Administrative Agent hereunder by a successor,
such successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the Administrative Agent's
resignation hereunder, the provisions of this Article and Section 9.03 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent.
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Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any
document furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices. Except in the case of notices and other
-------
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to Alexander Haagen Properties Operating
Partnership, L.P., 3500 North Sepulveda Boulevard, Manhattan Beach,
California 90266, Attention: Steven M. Jaffe, Esq. (Telecopy No. 310-545-
8455), with a copy to Latham & Watkins, 633 West Fifth Street, Suite 4000,
Los Angeles, California 90071, Attention: Glen B. Collyer, Esq. (Telecopy
No. 213-891-8763);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, 380
Madison Avenue, New York, New York 10017, Attention of Fran Nuchims
(Telecopy No. (212) 622-3397), with a copy to The Chase Manhattan Bank,
270 Park Avenue, New York 10017, Attention of Jacqueline Stein, Esq.
(Telecopy No. 212-270-2934);
(c) if to the Issuing Bank, to it at The Chase Manhattan Bank, 55
Water Street, Room 1710, New York, New York 10041, Attention of Standing
Letter of Credit Department (Telecopy No. 212-638-8200);
(d) if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
-------------------
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such
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right or power, or any abandonment or discontinuance of steps to enforce such a
right or power, preclude any other or further exercise thereof or the exercise
of any other right or power. The rights and remedies of the Administrative
Agent, the Issuing Bank and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Administrative Agent, any Lender or the
Issuing Bank may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
-------- ----
such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan or
LC Exposure or reduce the rate of interest thereon, or reduce any fees payable
hereunder, without the written consent of each Lender affected thereby, (iii)
postpone the scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable hereunder, or reduce
the amount of, waive or excuse any such payment (other than interest under
Section 2.13(d)), or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender affected thereby, (iv)
change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing
of payments required thereby, without the written consent of each Lender, (v)
change any of the provisions of this Section or the definition of "Required
Lenders" or any other provision hereof specifying the number or percentage of
Lenders required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender, (vi) change the definitions of Available Credit, Borrowing Base or
Aggregate Value without the written consent of each Lender (provided that the
-------- ----
foregoing shall not include changes in any defined terms used in such
definitions), (vii) release Guarantor or, except as provided in Section 2.11(f)
hereof, any Subsidiary Guarantor from its obligations under the Guaranty or any
Subsidiary Guaranty, as applicable, without the written consent of each Lender,
(viii) release any Mortgaged Property otherwise than in compliance with Section
2.11(e) hereof without the written consent of each Lender, (ix) amend this
Section 9.02(b) without the written consent of each Lender, or (x) prior to the
Conversion Date only, change any of the provisions of Section 6.01(b) without
the written consent of Lenders having Commitments representing at least 85% of
the sum of the total Commitments at such time; provided further that no such
-------- ------- ----
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or the Issuing Bank hereunder without the prior written
consent of the Administrative Agent or the Issuing Bank, as the case may be.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall
----------------------------------
pay (i) all reasonable out-of-pocket expenses incurred by the Administrative
Agent and its Affiliates, including the reasonable fees, charges and
disbursements of counsel for the Administrative Agent, in connection with the
syndication of the credit facilities provided for herein, the preparation and
administration of this Agreement or any amendments, modifications
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or waivers of the provisions hereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable
out-of-pocket expenses incurred by the Issuing Bank in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder and (iii) all reasonable out-of-pocket expenses incurred
by the Administrative Agent, the Issuing Bank or, if an Event of Default has
occurred and is continuing, any Lender, including the reasonable fees, charges
and disbursements of any counsel for the Administrative Agent, the Issuing Bank
or any Lender, in connection with the enforcement or protection of its rights in
connection with this Agreement, including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder, including
all such reasonable out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.
(b) The Borrower shall indemnify the Administrative Agent, the Issuing Bank
and each Lender, and each Related Party of any of the foregoing Persons (each
such Person being called an "Indemnitee") against, and hold each Indemnitee
----------
harmless from, any and all losses, claims, damages, liabilities and related
reasonable expenses, including the reasonable fees, charges and disbursements of
any counsel for any Indemnitee, actually incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement or any agreement or instrument
contemplated hereby, the performance by the parties hereto of their respective
obligations hereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use
of the proceeds therefrom (including any refusal by the Issuing Bank to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any misrepresentation or breach of warranty under Section 5.12
or any Environmental Claim or any Environmental Lien or any Remedial Action
arising out of or based upon anything relating to Real Property owned or leased
by the Borrower or any of its Subsidiaries; or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
-------- ----
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses resulted from the gross negligence or willful
misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount required to be
paid by it to the Administrative Agent or the Issuing Bank under paragraph (a)
or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or the Issuing Bank, as the case may be, such Lender's
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
- -------- ----
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent or the Issuing Bank in its capacity as such.
(d) To the extent permitted by applicable law, the Borrower shall not assert,
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement or any agreement or instrument contemplated hereby, the Transactions,
any Loan or Letter of Credit or the use of the proceeds thereof.
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(e) All amounts due under this Section shall be payable not later than five
days after written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), except that the Borrower may
not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender (and any attempted assignment
or transfer by the Borrower without such consent shall be null and void).
Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank that
issues any Letter of Credit) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Bank and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it); provided that (i) except in
-------- ----
the case of an assignment to a Lender or an Affiliate of a Lender, the
Administrative (and, in the case of an assignment of all or a portion of a
Commitment or any Lender's obligations in respect of its LC Exposure, the
Issuing Bank) and prior to the occurrence of an Event of Default, the Borrower
must give their prior written consent to such assignment (which consent shall
not be unreasonably withheld), (ii) except in the case of an assignment to a
Lender or an Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Commitment, the amount of the Commitment of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, (iii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender's rights and obligations under this Agreement, (iv) the parties
to each assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance, together with a processing and recordation fee of
$3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; and provided further that
-------- ------- ----
any consent of the Borrower otherwise required under this paragraph shall not be
required if an Event of Default under clause (h) or (i) of Article VII has
occurred and is continuing. Subject to acceptance and recording thereof
pursuant to paragraph (d) of this Section, from and after the effective date
specified in each Assignment and Acceptance the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of the assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by
a Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
81
<PAGE>
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
--------
the Register shall be conclusive, and the Borrower, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall
be available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee, the assignee's completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Acceptance
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the Administrative
Agent or the Issuing Bank, sell participations to one or more banks or other
entities (a "Participant") in all or a portion of such Lender's rights and
-----------
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided that (i) such Lender's obligations under
-------- ----
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrower, the Administrative Agent, the Issuing Bank and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
-------- ----
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to Section
9.02(b) that affects such Participant. Subject to paragraph (f) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.18(c) as though it were a
Lender.
(f) A Participant shall not be entitled to receive any greater payment under
Section 2.15 or 2.17 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such
82
<PAGE>
Participant, unless the sale of the participation to such Participant is made
with the Borrower's prior written consent. A Participant that would be a Foreign
Lender if it were a Lender shall not be entitled to the benefits of Section 2.17
unless the Borrower is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrower, to comply with
Section 2.17(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or assignment
of a security interest; provided that no such pledge or assignment of a security
-------- ----
interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 9.05. Survival. All covenants, agreements, representations and
--------
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article
VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may
----------------------------------------
be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. This Agreement shall
become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held to be
------------
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
83
<PAGE>
SECTION 9.08. Right of Set-off. If an Event of Default shall have occurred
----------------
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Borrower
against any of and all the obligations of the Borrower now or hereafter existing
under this Agreement held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement and although such
obligations may be unmatured; provided that, each of the Lenders shall, and
-------- ----
hereby does, agree that it will not exercise such rights of set-off without the
prior written consent of the Administrative Agent. The rights of each Lender
under this Section are in addition to other rights and remedies (including other
rights of set-off) which such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.
----------------------------------------------------------
(a) This Agreement shall be construed in accordance with and governed by the
law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of the Supreme Court of the
State of New York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State court or, to the extent permitted by law, in such Federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Administrative Agent, the Issuing Bank
or any Lender may otherwise have to bring any action or proceeding relating to
this Agreement against the Borrower or its properties in the courts of any
jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 9.01. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
--------------------
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT
84
<PAGE>
OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table of
--------
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent, the
---------------
Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the written consent of the Borrower or (h) to the extent
such Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to the Administrative Agent,
the Issuing Bank or any Lender on a nonconfidential basis from a source other
than the Borrower. For the purposes of this Section, "Information" means all
-----------
information received from the Borrower relating to the Borrower or its business,
other than any such information that is available to the Administrative Agent,
the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by
the Borrower. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
85
<PAGE>
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to
------------------------
the contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts which are treated as interest on such
Loan under applicable law (collectively the "Charges"), shall exceed the maximum
-------
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
------------
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
86
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
ALEXANDER HAAGEN PROPERTIES OPERATING PARTNERSHIP,
L.P., a California limited partnership
By: ALEXANDER HAAGEN
PROPERTIES, INC., a Maryland corporation,
general partner
By:___________________________
Name:
Title:
THE CHASE MANHATTAN BANK, individually and as
Administrative Agent,
By:___________________________
Name:
Title:
CREDIT LYONNAIS, NEW YORK BRANCH
By:_______________________
Name:
Title:
CIBC INC.
By: CIBC OPPENHEIMER, CORP., AS AGENT
By:
Name:
Title:
<PAGE>
SCHEDULE 2.01
COMMITMENTS
<TABLE>
<CAPTION>
Lender Commitment
------ ------------
<S> <C>
The Chase Manhattan Bank $ 87,500,000
Credit Lyonnais, New York Branch $ 87,500,000
CIBC Inc. $ 75,000,000
------------
TOTAL $250,000,000
============
</TABLE>
<PAGE>
EXHIBIT B
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of ___________, 1997 (as
amended and in effect on the date hereof, the "Credit Agreement"), among
Alexander Haagen Properties Operating Partnership, L.P., the Lenders named
therein and The Chase Manhattan Bank, as Administrative Agent for the Lenders.
Terms defined in the Credit Agreement are used herein with the same meanings.
The Assignor named on the reverse hereof hereby sells and assigns, without
recourse, to the Assignee named on the reverse hereof, and the Assignee hereby
purchases and assumes, without recourse, from the Assignor, effective as of the
Assignment Date set forth on the reverse hereof, the interests set forth on the
reverse hereof (the "Assigned Interest") in the Assignor's rights and
obligations under the Credit Agreement, including, without limitation, the
interests set forth on the reverse hereof in the Commitment of the Assignor on
the Assignment Date and Loans owing to the Assignor which are outstanding on the
Assignment Date, together with the participations in Letters of Credit and LC
Disbursements held by the Assignor on the Assignment Date, but excluding accrued
interest and fees to and excluding the Assignment Date. The Assignee hereby
acknowledges receipt of a copy of the Credit Agreement. From and after the
Assignment Date (i) the Assignee shall be a party to and be bound by the
provisions of the Credit Agreement and, to the extent of the Assigned Interest,
have the rights and obligations of a Lender thereunder and (ii) the Assignor
shall, to the extent of the Assigned Interest, relinquish its rights and be
released from its obligations under the Credit Agreement.
This Assignment and Acceptance is being delivered to the Administrative Agent
together with (i) if the Assignee is a Foreign Lender, any documentation
required to be delivered by the Assignee pursuant to Section 2.17(e) of the
Credit Agreement, duly completed and executed by the Assignee, and (ii) if the
Assignee is not already a Lender under the Credit Agreement, an Administrative
Questionnaire in the form supplied by the Administrative Agent, duly completed
by the Assignee. The [Assignee/Assignor] shall pay the fee payable to the
Administrative Agent pursuant to Section 9.04(b) of the Credit Agreement.
<PAGE>
This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment
("Assignment Date"):
<TABLE>
===========================================================================================
Percentage Assigned of
Facility/Commitment (set
forth, to at least 8
decimals, as a percentage of
the Facility and the
Principal aggregate Commitments of all
Facility Amount Assigned Lenders thereunder)
- -------- --------------- ----------
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Commitment Assigned: $ %
- -------------------------------------------------------------------------------------------
Loans:
===========================================================================================
</TABLE>
The terms set forth above and on the reverse side hereof are hereby agreed to:
[Name of Assignor] , as Assignor
---------------------
By:______________________________
Name:
Title:
[Name of Assignee] , as Assignee
---------------------
By:______________________________
Name:
Title:
<PAGE>
The undersigned hereby consent to the within assignment:
The Chase Manhattan Bank,
as Administrative Agent,
By: /s/ Fran M. Nichims
-------------------------------
Name:
Title: Vice President
The Chase Manhattan Bank,
as Issuing Bank,
By: /s/ Fran M. Nichims
------------------------------
Name:
Title: Vice President
[Provided No Event of Default]
ALEXANDER HAAGEN PROPERTIES
OPERATING PARTNERSHIP, L.P.,
a California limited partnership
By: ALEXANDER HAAGEN PROPERTIES, INC., a
Maryland corporation, general partner
By: /s/ Stuart J.S. Gulland
-------------------------------
Name:
Title: SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-07673 of Alexander Haagen Properties, Inc. on Form S-3 and Registration
Statement No. 33-73306 of Alexander Haagen Properties, Inc. on Form S-8 of our
report dated February 20, 1998, appearing in this Annual Report on Form 10-K
of Alexander Haagen Properties, Inc. for the year ended December 31, 1997.
Deloitte & Touche LLP
Los Angeles, California
March 27, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,613
<SECURITIES> 0
<RECEIVABLES> 6,017
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 783,279
<DEPRECIATION> 121,202
<TOTAL-ASSETS> 710,713
<CURRENT-LIABILITIES> 0
<BONDS> 482,259
162
0
<COMMON> 0
<OTHER-SE> 149,677
<TOTAL-LIABILITY-AND-EQUITY> 710,713
<SALES> 0
<TOTAL-REVENUES> 88,961
<CGS> 0
<TOTAL-COSTS> 25,495
<OTHER-EXPENSES> 31,549<F1>
<LOSS-PROVISION> 57
<INTEREST-EXPENSE> 36,083
<INCOME-PRETAX> (4,223)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (422)
<CHANGES> 0
<NET-INCOME> (4,645)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES DEPRECIATION AND AMORTIZATION OF $13,869, $(1,229) ALLOCATED TO
MINORITY INTERESTS AND $9,355 IN A NON RECURRING CHARGE, RESPECTIVELY.
</FN>
</TABLE>
