SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 1-12590
GABLES RESIDENTIAL TRUST
(Exact name of Registrant as specified in its Charter)
MARYLAND 58-2077868
(State of Incorporation) (I.R.S. Employer Identification No.)
2859 Paces Ferry Road, Suite 1450
Atlanta, Georgia 30339
(Address of principal executive offices, including zip code)
(770) 436 - 4600
(Registrant's telephone number, including area code)
N/A
(Former name, former address and formal fiscal year,
if changed since last report)
Common shares of beneficial interest, par value $0.01 per share,
25,470,654 shares
The number of shares outstanding
of each of the registrant's classes of common stock, as of July 31, 1998
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 such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past (90) days.
(1) (X) YES ( ) NO
(2) (X) YES ( ) NO
<PAGE>
Page-2
GABLES RESIDENTIAL TRUST
FORM 10 - Q INDEX
Part I - Financial Information Page
------
Item 1: Financial Statements
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations for the three months ended 4
June 30, 1998 and 1997
Consolidated Statements of Operations for the six months ended 5
June 30, 1998 and 1997
Consolidated Statements of Cash Flows for the six months ended 6
June 30, 1998 and 1997
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of Financial Condition 12
and Results of Operations
Part II - Other Information 30
Item 1: Legal Proceedings
Item 2: Changes in Securities
Item 3: Defaults Upon Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
Signature 31
<PAGE>
Page-3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GABLES RESIDENTIAL TRUST
CONSOLIDATED BALANCE SHEETS
(Unaudited and Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
ASSETS:
Real estate assets:
Land ....................................................... $ 216,429 $ 150,894
Buildings .................................................. 1,119,115 770,305
Furniture, fixtures and equipment .......................... 76,763 60,015
Construction in progress ................................... 116,306 53,240
Land held for future development ........................... 51,644 21,774
---------- ----------
Real estate assets before accumulated depreciation ...... 1,580,257 1,056,228
Less: accumulated depreciation ............................ (115,888) (98,236)
---------- ----------
Net real estate assets ................................... 1,464,369 957,992
Cash and cash equivalents ..................................... 4,747 3,179
Restricted cash ............................................... 7,190 4,498
Deferred charges, net ......................................... 6,014 4,194
Other assets, net ............................................. 16,745 11,304
---------- ----------
Total assets ............................................. $ 1,499,065 $ 981,167
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Notes payable ................................................. $ 771,400 $ 435,362
Accrued interest payable ...................................... 5,395 1,999
Preferred dividend payable .................................... 432 424
Real estate taxes payable ..................................... 13,102 13,568
Accounts payable and accrued expenses - construction .......... 7,332 8,505
Accounts payable and accrued expenses - operating ............. 7,399 5,552
Security deposits ............................................. 4,628 2,260
Other long-term liability, net ................................ 11,343 --
---------- ----------
Total liabilities ........................................ 821,031 467,670
Minority interest of unitholders in Operating Partnership ..... 121,067 62,059
Series Z Preferred Shares at $25.00 liquidation preference,
180 shares issued and outstanding at June 30, 1998 .......... 4,500 --
Shareholders' equity:
Excess shares, $0.01 par value, 51,000 shares authorized .... -- --
Preferred shares, $0.01 par value, 20,000 shares authorized,
Series A Preferred Shares at $25.00 liquidation preference,
4,600 shares issued and outstanding; Series Z Preferred
Shares reported above.................................... 115,000 115,000
Common shares, $0.01 par value, 100,000 shares authorized,
25,466 and 21,991 shares issued and outstanding at June
30, 1998 and December 31, 1997 ............................ 255 220
Additional paid-in capital .................................. 438,570 339,009
Deferred long-term compensation ............................. (1,358) (594)
Accumulated earnings (deficit) .............................. 0 (2,197)
---------- ----------
Total shareholders' equity ............................... 552,467 451,438
---------- ----------
Total liabilities and shareholders' equity ............... $ 1,499,065 $ 981,167
========== ==========
<FN>
The accompanying notes are an integral part of these balance sheets.
</FN>
</TABLE>
<PAGE>
Page-4
GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1998 1997
-------- --------
<S> <C> <C>
Rental revenues .................................................... $ 51,794 $ 30,944
Other property revenues ............................................ 2,724 1,525
--------- ---------
Total property revenues ....................................... 54,518 32,469
--------- ---------
Property management revenues ....................................... 1,245 747
Other .............................................................. 413 525
--------- ---------
Total other revenues .......................................... 1,658 1,272
--------- ---------
Total revenues ................................................ 56,176 33,741
--------- ---------
Property operating and maintenance (exclusive of items shown
separately below) ............................................. 18,469 11,473
Depreciation and amortization ...................................... 10,324 5,682
Amortization of deferred financing costs ........................... 285 222
Property management - owned ........................................ 1,283 765
Property management - third party .................................. 903 527
General and administrative ......................................... 1,614 774
Interest ........................................................... 11,163 6,399
Credit enhancement fees ............................................ 441 129
Loss on treasury lock extension .................................... 199 --
--------- ---------
Total expenses ................................................ 44,681 25,971
--------- ---------
Income before equity in income of joint ventures and interest income 11,495 7,770
Equity in income of joint ventures ................................. 92 84
Interest income .................................................... 119 71
--------- ---------
Income before minority interest .................................... 11,706 7,925
Minority interest of unitholders in Operating Partnership .......... (2,192) (1,219)
--------- ---------
Net income ......................................................... 9,514 6,706
Dividends to preferred shareholders ................................ (2,394) --
--------- ---------
Net income available to common shareholders ........................ $ 7,120 $ 6,706
========= =========
Weighted average number of common shares outstanding - basic ....... 22,573 19,405
Weighted average number of common shares outstanding - diluted ..... 30,087 23,049
Per Common Share Information:
Income before extraordinary loss, net - basic ...................... $ 0.32 $ 0.34
Net income - basic ................................................. $ 0.32 $ 0.34
Income before extraordinary loss, net - diluted .................... $ 0.32 $ 0.34
Net income - diluted ............................................... $ 0.32 $ 0.34
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Page-5
GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
---------- ---------
<S> <C> <C>
Rental revenues .................................................... $ 90,435 $ 60,427
Other property revenues ............................................ 4,513 2,863
--------- ---------
Total property revenues ....................................... 94,948 63,290
--------- ---------
Property management revenues ....................................... 1,912 1,546
Other .............................................................. 806 1,137
--------- ---------
Total other revenues .......................................... 2,718 2,683
--------- ---------
Total revenues ................................................ 97,666 65,973
--------- ---------
Property operating and maintenance (exclusive of items shown
separately below) ............................................. 32,099 22,531
Depreciation and amortization ...................................... 17,920 11,019
Amortization of deferred financing costs ........................... 507 503
Property management - owned ........................................ 2,359 1,593
Property management - third party .................................. 1,481 1,167
General and administrative ......................................... 2,674 1,655
Interest ........................................................... 17,498 12,214
Credit enhancement fees ............................................ 562 257
Loss on treasury lock extension .................................... 2,010 --
--------- ---------
Total expenses ................................................ 77,110 50,939
--------- ---------
Income before equity in income of joint ventures and interest income 20,556 15,034
Equity in income of joint ventures ................................. 167 150
Interest income .................................................... 181 193
--------- ---------
Income before gain on sale of real estate assets ................... 20,904 15,377
Gain on sale of real estate assets ................................. -- 4,858
--------- ---------
Income before minority interest and extraordinary loss, net ........ 20,904 20,235
Minority interest of unitholders in Operating Partnership .......... (3,251) (3,119)
--------- ---------
Income before extraordinary loss, net .............................. 17,653 17,116
Extraordinary loss, net of minority interest ....................... -- (602)
--------- ---------
Net income ......................................................... 17,653 16,514
Dividends to preferred shareholders ................................ (4,780) --
--------- ---------
Net income available to common shareholders ........................ $ 12,873 $ 16,514
========= =========
Weighted average number of common shares outstanding - basic ....... 22,300 19,337
Weighted average number of common shares outstanding - diluted ..... 28,167 23,033
Per Common Share Information:
Income before extraordinary loss, net - basic ...................... $ 0.58 $ 0.88
Extraordinary loss, net - basic .................................... -- ($ 0.03)
Net income - basic ................................................. $ 0.58 $ 0.85
Income before extraordinary loss, net - diluted .................... $ 0.58 $ 0.87
Extraordinary loss, net - diluted .................................. -- ($ 0.03)
Net income - diluted ............................................... $ 0.58 $ 0.84
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Page-6
GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................... $ 17,653 $ 16,514
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ................................. 18,427 11,522
Equity in income of joint ventures ............................ (167) (150)
Minority interest of unitholders in Operating Partnership ..... 3,251 3,119
Gain on sale of real estate assets ............................ -- (4,858)
Long-term compensation expense ................................ 580 287
Loss on treasury lock extension ............................... 2,010 --
Extraordinary loss, net of minority interest .................. -- 602
Amortization of discount on long-term liability ............... 192 --
Change in operating assets and liabilities:
Restricted cash ............................................. (2,344) 908
Other assets ................................................ (4,706) (559)
Other liabilities, net ...................................... 5,090 (2,771)
-------- --------
Net cash provided by operating activities .............. 39,986 24,614
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase and construction of real estate assets .................. (259,775) (72,461)
Net proceeds from sale of real estate assets ..................... -- 12,333
Long-term land lease payments .................................... (1,000) (1,000)
Distributions received from joint ventures ....................... 149 136
-------- --------
Net cash used in investing activities ....................... (260,626) (60,992)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common share offerings, net of issuance costs ...... 87,530 --
Proceeds from the exercise of share options ...................... 2,143 871
Share Builder Plan contributions ................................. 30 19
Payments of deferred financing costs ............................. (2,425) (203)
Notes payable proceeds ........................................... 378,500 74,243
Notes payable repayments ......................................... (209,366) (17,214)
Principal escrow deposits ........................................ (349) (342)
Preferred dividends paid ......................................... (4,772) --
Common dividends paid ($1.00 and $0.98 per share, respectively) .. (23,769) (18,971)
Common distributions paid ($1.00 and $0.98 per Unit, respectively) (5,314) (3,458)
-------- --------
Net cash provided by financing activities ................... 222,208 34,945
-------- --------
Net change in cash and cash equivalents .......................... 1,568 (1,433)
Cash and cash equivalents, beginning of period ................... 3,179 4,385
-------- --------
Cash and cash equivalents, end of period ......................... $ 4,747 $ 2,952
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest ...................................... $ 17,743 $ 14,609
Interest capitalized ........................................ 3,641 2,497
-------- --------
Cash paid for interest, net of amounts capitalized .......... $ 14,102 $ 12,112
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Page-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Share Amounts)
- ---------------------------------------------------------------------------
1. ORGANIZATION AND FORMATION OF THE COMPANY
Gables Residential Trust is a self-administered and self-managed real estate
investment trust (a "REIT") formed in 1993 under Maryland law to continue and to
expand the multifamily apartment community management, development,
construction, and acquisition operations of its privately owned predecessor
organization. The term "Gables Residential Group" as used herein refers to the
privately owned predecessor organization prior to the completion of the
Company's initial public offering on January 26, 1994 (the "IPO"). The term
"Company" or "Gables" as used herein means Gables Residential Trust and its
subsidiaries on a consolidated basis (including Gables Realty Limited
Partnership and its subsidiaries), or, where the context so requires, Gables
Residential Trust only.
Gables engages in the multifamily apartment community management, development,
construction, and acquisition businesses, including the provision of related
brokerage and corporate rental housing services. Substantially all of these
businesses are conducted through Gables Realty Limited Partnership (the
"Operating Partnership"). The Company controls the Operating Partnership through
Gables GP, Inc. ("GGPI"), a wholly-owned subsidiary and the sole general partner
of the Operating Partnership (this structure is commonly referred to as an
umbrella partnership REIT or "UPREIT"). At June 30, 1998, the Company was a
78.3% economic owner of the Operating Partnership (excluding the Company's
ownership of 100% of the Operating Partnership's non-convertible preferred
units). Gables' third party management businesses are conducted through two
subsidiaries of the Operating Partnership, Central Apartment Management, Inc., a
Texas corporation, and East Apartment Management, Inc., a Georgia corporation.
As of June 30, 1998, Gables owned 79 completed multifamily apartment communities
comprising 23,139 apartment homes, of which 35 were developed and 44 were
acquired by Gables, and an indirect 25% general partner interest in two
apartment communities developed by Gables comprising 663 apartment homes. Gables
also owned six multifamily apartment communities that were under construction at
June 30, 1998 that are expected to comprise 1,844 apartment homes upon
completion. As of June 30, 1998, Gables owned parcels of land for the future
development of twelve apartment communities expected to comprise an estimated
3,425 apartment homes. In July, 1998, Gables acquired parcels of land for the
future development of three apartment communities expected to comprise an
estimated 1,021 apartment homes. Additionally, Gables has contracts or options
to acquire additional parcels of land. There can be no assurance that Gables
will acquire these land parcels; however, it is Gables' intent to develop an
apartment community on each such land parcel, if purchased.
As of July 31, 1998, Gables was under contract to acquire one multifamily
apartment community comprising 308 apartment homes. There can be no assurance
that such acquisition will close as contemplated, or that such acquisition will
be consummated at all. Gables is pursuing other acquisition opportunities in the
ordinary course of business which have not yet been, or may never be, put under
contract.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements of Gables Residential Trust
include the consolidated accounts of Gables Residential Trust and its
subsidiaries (including Gables Realty Limited Partnership and its subsidiaries).
As a result of the structure of the IPO business combination, certain partners
and owners of the entities in Gables Residential Group received common shares of
the Company and/or units of limited partnership ("Units") in the Operating
Partnership. Pursuant to the terms of the partnership agreement of the Operating
Partnership, as of January 26, 1995, the Operating Partnership became obligated
to redeem such Units at a unitholder's request for cash equal to the fair market
value of a common share of the Company at the time of such redemption, provided
that the Company at its option may elect to acquire any such Unit presented for
redemption for one common share of the Company. The Company currently intends to
acquire such Units for common shares of the Company rather than to cause the
Operating Partnership to redeem such Units for cash. Purchase accounting was
applied to the acquisition of all non-controlled interests. The acquisition of
all other interests in the IPO was accounted for as a reorganization of entities
under common control and, accordingly, was reflected at historical cost in a
manner similar to that in pooling of interests accounting.
<PAGE>
Page-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Share Amounts)
- ---------------------------------------------------------------------------
All significant intercompany accounts and transactions have been eliminated in
consolidation. The consolidated financial statements of Gables Residential Trust
have been adjusted for the minority interest of unitholders in the Operating
Partnership. Because Units, if presented for redemption, are likely to be
exchanged for the common shares of the Company on a one-for-one basis, minority
interest of unitholders in the Operating Partnership is calculated based on the
weighted average of common shares and Units outstanding during the applicable
period.
The accompanying interim unaudited financial statements have been prepared by
Gables' management in accordance with generally accepted accounting principles
("GAAP") for interim financial information and in conjunction with the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normally recurring adjustments) considered necessary for a fair
presentation for these interim periods have been included. The results of
operations for the interim period ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the full year. These
financial statements should be read in conjunction with the financial statements
of Gables Residential Trust included in the Gables Residential Trust Form 10-K
for the year ended December 31, 1997.
3. PORTFOLIO ACQUISITIONS
On April 1, 1998, Gables acquired the properties and operations of Trammell Crow
Residential South Florida ("TCR/SF"), which consisted of 15 multifamily
apartment communities containing a total of 4,197 apartment homes, and all of
TCR/SF's residential construction and development and third party management
activities in South Florida (collectively, the "South Florida Acquisition"). In
consideration for such properties and operations, Gables (i) paid $155.0 million
in cash, (ii) assumed approximately $135.9 million of tax- exempt debt and (iii)
issued approximately 2,348 Units valued at approximately $64.9 million. In
addition, up to $12.5 million of the purchase price was deferred by Gables until
January 1, 2000, at which time Gables will issue a number of Units equal in
value to such deferred amount. The acquisition increased the size of Gables'
portfolio under management on April 1, 1998 from approximately 28,000 to 40,000
apartment homes.
The South Florida Acquisition has been accounted for under the purchase method
of accounting in accordance with Accounting Principles Board Opinion No. 16.
Accordingly, assets acquired and liabilities assumed have been recorded at their
estimated fair values which may be subject to further modification based upon
the final determination of (i) the acquired properties' fair values and (ii) the
actual closing costs associated with the transaction. Management believes that
the final allocation of the purchase price will not differ materially from the
purchase price allocation reflected herein. The accompanying consolidated
statements of operations include the operating results of TCR/SF since April 1,
1998, the closing date of the South Florida Acquisition. The following unaudited
pro forma information for the six months ended June 30, 1998 and 1997 has been
prepared assuming the South Florida Acquisition had been consummated on January
1, 1997. The unaudited pro forma information (i) includes the historical
operating results of the properties and residential construction and development
and third-party management activities acquired and (ii) does not purport to be
indicative of the results which actually would have been obtained had the South
Florida Acquisition been consummated on January 1, 1997, or which may be
attained in future periods.
Six Months Ended June 30,
1998 1997
--------- ---------
Total revenues $107,694 $83,856
Income before extraordinary loss, net 16,763 16,089
Net income available to common shareholders 11,983 15,544
Per common share information:
Income before extraordinary loss, net-basic $0.54 $0.83
Net income - basic $0.54 $0.80
Income before extraordinary loss, net - diluted $0.53 $0.83
Net income - diluted $0.53 $0.80
<PAGE>
Page-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Share Amounts)
- ---------------------------------------------------------------------------
In April, 1998, Gables acquired four multifamily apartment communities
comprising a total of 913 apartment homes located in Houston, Texas (the
"Greystone Acquisition"). In connection with such acquisition, Gables assumed
approximately $31.0 million of indebtedness, at fair value, and issued
approximately 647 Units valued at approximately $17.5 million. In addition, up
to $2.0 million of the purchase price was deferred by Gables for up to two years
from the April, 1998 closing date, at which time Gables will issue a number of
Units, based on the prior two years' economic performance, equal in value to
such deferred amount.
4. SECONDARY OFFERINGS AND ISSUANCES OF OPERATING PARTNERSHIP UNITS
Secondary Common Share Offerings
- --------------------------------
Since the IPO, the Company has issued a total of 14,831 common shares in eight
offerings generating $347,771 in net proceeds which were generally used (i) to
reduce outstanding indebtedness under interim financing vehicles utilized to
fund Gables' development and acquisition activities and (ii) for general working
capital purposes including funding of future development and acquisition
activities.
Preferred Share Offerings
- -------------------------
On July 24, 1997, the Company issued 4,600 shares of 8.30% Series A Cumulative
Redeemable Preferred Shares (liquidation preference $25.00 per share) (the
"Series A Preferred Shares"). The net proceeds from this offering of
approximately $111 million were used to reduce outstanding indebtedness under
the interim financing vehicles discussed above. The Series A Preferred Shares,
which may be redeemed by the Company at $25.00 per share, plus accrued and
unpaid dividends, on or after July 24, 2002, have no stated maturity, sinking
fund or mandatory redemption and are not convertible into any other securities
of the Company.
On June 18, 1998, the Company issued 180 shares of 5.0% Series Z Cumulative
Redeemable Preferred Shares (liquidation preference $25.00 per share) (the
"Series Z Preferred Shares") in connection with the acquisition of a parcel of
land for future development. The Series Z Preferred Shares, which may be
redeemed by the Company at $25.00 per share, plus accrued and unpaid dividends,
at any time, are subject to mandatory redemption on June 18, 2018. The Series Z
Preferred Shares are not subject to any sinking fund and are not convertible
into any other securities of the Company.
Issuances of Operating Partnership Units
- ----------------------------------------
Since the IPO, Gables has issued a total of 3,898 Units in connection with the
South Florida Acquisition, the Greystone Acquisition and the acquisition of
operating apartment communities and parcels of land for future development.
5. EXTRAORDINARY LOSS, NET
Extraordinary loss, net for the six months ended June 30, 1997 represents (i)
the write-off of unamortized deferred financing costs and prepaid credit
enhancement fees associated with the defeasance of the tax-exempt bond financing
encumbering the Club Candlewood property that was sold in January, 1997 and (ii)
the write-off of unamortized deferred financing costs associated with the
February 28, 1997 retirement of a conventional mortgage note payable that was
scheduled to mature on September 1, 1997. The extraordinary loss totaling $712
is presented net of the $110 portion of the loss attributable to the minority
interest unitholders.
<PAGE>
Page-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Share Amounts)
- ---------------------------------------------------------------------------
6. PER SHARE INFORMATION
In February, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," which specifies the computation, presentation and disclosure
requirements for earnings per share. Gables adopted SFAS No. 128 for the year
ended December 31, 1997. All prior period earnings per share data were restated
to conform with the provisions of SFAS No. 128. Basic earnings per share are
computed based on net income available to common shareholders and the weighted
average number of common shares outstanding. Diluted earnings per share reflect
the assumed issuance of common shares under share option and incentive plans and
upon conversion of Units. Reconciliations of income available to common
shareholders and weighted average common shares used in the basic and diluted
earnings per share computations are detailed below.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BASIC AND DILUTED INCOME AVAILABLE TO
COMMON SHAREHOLDERS (numerator):
Income before extraordinary loss, net - basic $7,120 $6,706 $12,873 $17,116
Minority interest of unitholders in Operating 2,192 1,219 3,251 3,119
Partnership
Amortization of discount on long-term liability 192 -- 192 --
-------- ------- ------- -------
Income before extraordinary loss, net - diluted $9,504 $7,925 $16,316 $20,235
======== ======= ======= =======
Net income - basic $7,120 $6,706 $12,873 $16,514
Minority interest of unitholders in Operating Partnership 2,192 1,219 3,251 3,009
Amortization of discount on long-term liability 192 -- 192 --
-------- ------- ------- -------
Net income - diluted $9,504 $7,925 $16,316 $19,523
======== ======= ======= =======
COMMON SHARES (denominator):
Average shares outstanding - basic 22,573 19,405 22,300 19,367
Incremental shares from assumed conversions of:
Stock options 150 116 150 138
Outstanding Units 6,946 3,528 5,508 3,528
Units issuable upon settlement of long-term liability 418 -- 209 --
-------- ------- ------- -------
Average shares outstanding-diluted 30,087 23,049 28,167 23,033
======== ======= ======= =======
</TABLE>
7. INTEREST RATE PROTECTION AGREEMENTS
Gables uses interest rate protection agreements in the form of "rate caps" and
"rate swaps" to manage its exposure to interest rate changes. These agreements
are considered hedges of Gables' borrowings. Upfront amounts paid to purchase
rate cap agreements are capitalized and amortized over the terms of the related
agreements and are written off upon the expiration thereof. Such amortization is
included in amortization of deferred financing costs in the accompanying
statements of operations. Monthly amounts paid or received under rate cap and
rate swap agreements are recognized as adjustments to interest expense.
In certain situations, Gables uses forward treasury lock agreements to mitigate
the potential effects of changes in interest rates for prospective transactions.
Cash payments made or received upon settlement of such hedge agreements are
deferred and amortized as an adjustment to interest expense over the life of the
related debt instrument. In connection with amendments to such agreements to
extend the related termination date, Gables recorded a $199 and $2,010 loss for
the three and six months ended June 30, 1998, respectively, in accordance with
GAAP. The market rate in effect on the date of extension is used as the
"locked-in" rate for purposes of recording interest expense over the life of the
debt instrument the treasury lock hedged.
<PAGE>
Page-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Share Amounts)
- ---------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. SFAS
No. 133 must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997.
Gables has not yet quantified the impact of adopting SFAS No. 133 on its
financial statements. However, SFAS No. 133 could increase volatility in net
income and other comprehensive income.
<PAGE>
Page-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
OVERVIEW
Gables is a self-administered and self-managed real estate investment trust (a
"REIT") focused within the multifamily industry in the Southwestern and
Southeastern region of the United States (the "Sunbelt" or "Sunbelt Region").
Gables' operating performance relies predominantly on net operating income from
its apartment communities. Gables' net operating income is influenced by
operating expenses and rental revenues, which are affected by the supply and
demand dynamics within Gables' markets. Gables' performance is also affected by
the general availability and cost of capital and by its ability to develop and
to acquire additional apartment communities with returns in excess of its
blended cost of equity and debt capital.
Gables' objective is to increase shareowner value by being a dominant owner and
operator of Class AA/A multifamily apartment communities in the Sunbelt Region.
To achieve its objective, Gables employs a number of business strategies. First,
Gables adheres to a strategy of owning and operating Class AA/A apartment
communities in the belief that such communities will maintain higher levels of
occupancy and rental rates. Gables believes that such communities, when
supplemented with high quality services and amenities, attract the affluent
renter-by-choice, who is willing to pay a premium for conscientious service and
high quality communities. Accordingly, Gables' communities possess innovative
architectural designs and numerous amenities and services that Gables believes
are desirable by its target customers. Second, Gables seeks to grow cash flow
from operating communities through innovative, proactive property management
that focuses on resident satisfaction and retention, increases in property rents
and occupancy levels, and the control of operating expenses through improved
economies of scale. Third, Gables develops and acquires high-quality apartment
communities in in-fill locations and master-planned communities near major
employment centers in the Sunbelt with the objective of achieving critical mass
in the most desirable submarkets. Finally, due to the cyclical nature of the
real estate markets, Gables has adopted an investment strategy based on strong
local presence and expertise, which it believes will allow for growth through
acquisition and development (as warranted by underlying market fundamentals) and
will help ensure favorable initial and long-term returns. Gables believes the
successful execution of these operating and investment strategies will result in
growth in operating cash flow.
Gables believes it is well positioned to continue achieving its objective
because of its long-established presence as a fully integrated real estate
management, development, construction and acquisition company in its markets.
Gables believes that its established, local market presence creates a
competitive advantage in generating increased cash flow from (i) property
operations during different economic cycles and (ii) new investment
opportunities that involve site selection, market information and requests for
entitlements and zoning petitions. Gables' markets are geographically
independent, rely on diverse economic foundations and have experienced
above-average job growth.
Portfolio wide occupancy levels have remained high and portfolio wide rental
rates have continued to increase during each of the last several years. Gables
expects portfolio wide rental expenses to increase at a rate slightly ahead of
inflation, but less than the increase in property revenues, for the coming
twelve months. In certain situations, management's evaluation of the growth
prospects for a specific asset may result in a determination to dispose of the
asset. In this event, management would intend to sell the asset and utilize the
net proceeds from any such sale to invest in new assets which are expected to
have better growth prospects or to reduce indebtedness. Gables maintains
staffing levels sufficient to meet the existing construction, acquisition, and
leasing activities. If market conditions warrant, management would anticipate
adjusting staffing levels to mitigate a negative impact on results of
operations.
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the accompanying consolidated
financial statements and the notes thereto. This report on Form 10-Q contains
forward-looking statements within the meaning of Section 27A of the Securities
<PAGE>
Page-13
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Actual results or developments could differ materially from those
projected in such statements as a result of certain factors set forth in the
section entitled "Certain Factors Affecting Future Operating Results" on Page 28
of this Form 10-Q and elsewhere in this report.
FORMATION OF GABLES AND INITIAL PUBLIC OFFERING
Gables Residential Trust was formed in 1993 under Maryland law to continue and
to expand the multifamily apartment community management, development,
construction, and acquisition operations of its privately owned predecessor
organization. The term "Company" or "Gables" as used herein means Gables
Residential Trust and its subsidiaries on a consolidated basis (including Gables
Realty Limited Partnership and its subsidiaries), or, where the context so
requires, Gables Residential Trust only. At the completion of the Company's
initial public offering on January 26, 1994 (the "IPO"), Gables sold 9,430
common shares (including 1,230 shares as a result of the exercise of an
over-allotment option by the underwriters) at a price to the public of $22.50
per share. The net proceeds to Gables from such sale totaled approximately $190
million, the majority of which were used to reduce indebtedness and to purchase
minority interests in certain property partnerships.
PORTFOLIO ACQUISITIONS
On April 1, 1998, Gables acquired the properties and operations of Trammell Crow
Residential South Florida ("TCR/SF"), which consisted of 15 multifamily
apartment communities (the "South Florida Communities") containing a total of
4,197 apartment homes, and all of TCR/SF's residential construction and
development and third party management activities in South Florida
(collectively, the "South Florida Acquisition"). In consideration for such
properties and operations, Gables (i) paid $155.0 million in cash, (ii) assumed
approximately $135.9 million of tax-exempt debt and (iii) issued approximately
2,348 Units, valued at approximately $64.9 million. The cash portion of the
purchase price was funded through borrowings under Gables' unsecured credit
facilities (the "Credit Facilities"). In addition, up to $12.5 million of the
purchase price was deferred by Gables until January 1, 2000, at which time
Gables will issue a number of Units equal in value to such deferred amount. The
acquisition increased the size of Gables' portfolio under management on April 1,
1998 from approximately 28,000 to 40,000 apartment homes.
In April, 1998, Gables acquired four multifamily apartment communities
comprising a total of 913 apartment homes located in Houston, Texas (the
"Greystone Acquisition"). In connection with such acquisition, Gables assumed
approximately $31.0 million of indebtedness, at fair value, and issued
approximately 647 Units valued at $17.5 million. In addition, up to $2.0 million
of the purchase price was deferred by Gables for up to two years from the April,
1998 closing date, at which time Gables will issue a number of Units, based on
the prior two years' economic performance, equal in value to such deferred
amount.
SECONDARY OFFERINGS AND ISSUANCES OF OPERATING PARTNERSHIP UNITS
Secondary Common Share Offerings
- --------------------------------
Since the IPO, the Company has issued a total of 14,831 common shares in eight
offerings generating $347,771 in net proceeds which were generally used (i) to
reduce outstanding indebtedness under interim financing vehicles utilized to
fund Gables' development and acquisition activities and (ii) for general working
capital purposes including funding of future development and acquisition
activities.
Preferred Share Offerings
- -------------------------
On July 24, 1997, the Company issued 4,600 shares of 8.30% Series A Cumulative
Redeemable Preferred Shares (liquidation preference $25.00 per share) (the
"Series A Preferred Shares"). The net proceeds from this offering of
approximately $111 million were used to reduce outstanding indebtedness under
the interim financing vehicles discussed above. The Series A Preferred Shares,
<PAGE>
Page-14
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
which may be redeemed by the Company at $25.00 per share, plus accrued and
unpaid dividends, on or after July 24, 2002, have no stated maturity, sinking
fund or mandatory redemption and are not convertible into any other securities
of the Company.
On June 18, 1998, the Company issued 180 shares of 5.0% Series Z Cumulative
Redeemable Preferred Shares (liquidation preference $25.00 per share) (the
"Series Z Preferred Shares") in connection with the acquisition of a parcel of
land for future development. The Series Z Preferred Shares, which may be
redeemed by the Company at $25.00 per share, plus accrued and unpaid dividends,
at any time, are subject to mandatory redemption on June 18, 2018. The Series Z
Preferred Shares are not subject to any sinking fund and are not convertible
into any other securities of the Company.
Issuances of Operating Partnership Units
- ----------------------------------------
Since the IPO, Gables has issued a total of 3,898 Units in connection with the
South Florida Acquisition, the Greystone Acquisition and the acquisition of
operating apartment communities and parcels of land for future development.
<PAGE>
Page-15
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS OF GABLES FOR THE THREE MONTHS ENDED JUNE 30,
1998 (THE "1998 PERIOD") TO THE THREE MONTHS ENDED JUNE 30, 1997 (THE "1997
PERIOD").
Gables' net income is generated primarily from the operation of its apartment
communities. For purposes of evaluating comparative operating performance,
Gables categorizes its operating communities based on the period each community
reaches stabilized occupancy. A community is considered by Gables to have
achieved stabilized occupancy on the earlier to occur of (i) attainment of 93%
physical occupancy or (ii) one year after completion of construction. The
operating performance for all of Gables' apartment communities combined for the
three months ended June 30, 1998 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------- ---------- ---------- -----------
$ %
1998 1997 Change Change
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Rental and other revenue:
Same store communities (1) $29,860 $28,450 $1,410 5.0%
Communities stabilized during the 1998 Period, but not during the 1997 4,865 3,417 1,448 42.4%
Period (2)
Development and lease-up communities (3) 1,891 241 1,650 684.6%
Acquired communities (4) 17,902 361 17,541 4,859.0%
Sold communities (5) 0 0 0 ---%
---------- ---------- ---------- -----------
Total property revenues $54,518 $32,469 $22,049 67.9%
---------- ---------- ---------- -----------
Property operating and maintenance expense (exclusive of depreciation
and amortization):
Same store communities (1) $10,162 $10,139 $23 0.2%
Communities stabilized during the 1998 Period, but not during the 1997 1,714 1,191 523 43.9%
Period (2)
Development and lease-up communities (3) 395 59 336 569.5%
Acquired communities (4) 6,198 84 6,114 7,278.6%
Sold communities (5) 0 0 0 ---%
---------- ---------- ---------- ----------
Total specified expenses $18,469 $11,473 $6,996 61.0%
---------- ---------- ---------- ----------
Revenues in excess of specified expenses $36,049 $20,996 $15,053 71.7%
---------- ---------- ---------- ----------
Revenues in excess of specified expenses as a percentage of total
property revenues 66.1% 64.7% --- 1.4%
---------- ---------- ---------- ----------
<FN>
(1) Communities which were owned and fully stabilized throughout both the 1998 Period and 1997
Period.
(2) Communities which were completed and fully stabilized during all of the 1998 Period, but were
not completed and fully stabilized during all of the 1997 Period.
(3) Communities in the development/lease-up phase which were not fully stabilized during all or any
of the 1998 Period.
(4) Communities which were acquired subsequent to April 1, 1997.
(5) Communities which were sold subsequent to April 1, 1997.
</FN>
</TABLE>
<PAGE>
Page-16
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
Total property revenues increased $22,049, or 67.9%, from $32,469 to $54,518 due
primarily to increases in the number of apartment homes resulting from the
acquisition and development of additional communities and to increases in rental
rates on communities stabilized throughout both periods ("same store"). Below is
additional information regarding the increases in total property revenues for
three of the five community categories presented in the preceding table:
SAME STORE COMMUNITIES:
<TABLE>
<CAPTION>
Percent
Increase Increase
(Decrease) (Decrease) Increase
Number of in Total in Total Occupancy (Decrease)
Number of Apartment Percent Property Property During the in
Market Properties Homes of Total Revenues Revenues 1998 Period Occupancy
------ ---------- ----- ---------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Houston 14 5,045 37.7% $900 8.4% 95.9% 1.7%
Atlanta 12 3,470 25.9% 200 2.8% 96.1% 1.0%
Dallas 7 1,659 12.4% 200 4.9% 94.6% -0.8%
Nashville 4 1,166 8.7% -22 -1.0% 94.9% -0.8%
Memphis 2 964 7.2% 56 3.2% 96.3% 1.2%
San Antonio 2 544 4.1% 42 3.6% 91.6% 0.7%
Austin 2 532 4.0% 34 2.5% 92.8% -2.5%
----- ------ ------- ------ ------ ------ ------
43 13,380 100.0% $1,410 5.0% 95.4% 0.7%
===== ====== ======= ====== ====== ====== ======
</TABLE>
COMMUNITIES STABILIZED DURING THE 1998 PERIOD BUT NOT DURING THE 1997 PERIOD:
Increase
Number of in Total Occupancy
Number of Apartment Percent Property During the
Market Properties Homes of Total Revenues 1998 Period
- -------- ---------- --------- --------- --------- -------------
Atlanta 4 1,246 61.2% $1,335 94.9%
Memphis 2 490 24.1% 119 93.7%
Dallas 1 300 14.7% -6 86.8%
---- ------- ------- ------ -------
7 2,036 100.0% $1,448 93.5%
==== ======= ======= ====== =======
DEVELOPMENT AND LEASE-UP COMMUNITIES:
Increase
Number of in Total Occupancy
Number of Apartment Percent Property During the
Market Properties Homes of Total Revenues 1998 Period
- -------- ---------- ---------- -------- ---------- -----------
Austin 2 529 31.5% $930 67.4%
Orlando 2 511 30.4% 500 40.1%
Atlanta 1 386 22.9% 109 11.9%
Houston 1 256 15.2% 111 14.3%
---- ------ ------- ------ -------
6 1,682 100.0% $1,650 38.3%
==== ====== ======= ====== =======
<PAGE>
Page-17
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
Other revenues increased $386, or 30.3%, from $1,272 to $1,658 due primarily to
an increase in property management revenues of $498, or 66.7%, from $747 to
$1,245 resulting from a net increase of properties managed by Gables for third
parties as a result of the South Florida Acquisition, offset by a decrease in
income from certain ancillary services.
Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $6,996, or 61.0%, from $11,473 to $18,469 due to an
increase in apartment homes resulting from the acquisition and development of
additional communities and an increase for same store communities of 0.2%. The
same store increase in operating expenses represents increased payroll costs and
property taxes, offset in part by reduced utilities, marketing and insurance
expenses.
Depreciation and amortization expense increased $4,642, or 81.7%, from $5,682 to
$10,324 due primarily to the acquisition and development of additional
communities.
Property management expense for owned communities and third party properties on
a combined basis increased $894, or 69.2%, from $1,292 to $2,186 due primarily
to an increase of approximately 14,500 apartment homes managed from 26,800 in
the 1997 Period to 41,300 in the 1998 Period resulting primarily from the South
Florida Acquisition, in addition to inflationary increases in expenses and
certain non-recurring expense savings in the 1997 Period. Gables allocates
property management expenses to both owned communities and third party
properties based on the proportionate share of total apartment homes and units
managed.
General and administrative expense increased $840, or 108.5%, from $774 to
$1,614 due primarily to (i) compensation and other costs for new positions
associated with the South Florida Acquisition, (ii) increased compensation costs
and (iii) the expensing of internal costs of indentifying and acquiring
operating apartment communities effective March 20, 1998 in accordance with the
Emerging Issues Task Force Issue No. 97-11, Accounting for Internal Costs
Relating to Real Estate Acquisitions ("EITF No. 97-11").
Interest expense increased $4,764, or 74.4%, from $6,399 to $11,163 due to an
increase in operating debt associated with the acquisition and development of
additional communities, including the debt assumed in connection with the South
Florida Acquisition and the Greystone Acquisition. These increases in interest
expense have been offset in part as a result of the offerings the Company has
consummated between periods, the proceeds of which have been primarily used to
reduce indebtedness.
Loss on treasury lock extension of $199 in the 1998 Period represents the loss
recorded, in accordance with generally accepted accounting principles ("GAAP"),
in connection with the amendment of a forward treasury lock agreement to extend
the termination date. The market rate in effect on the date of extension is used
as the "locked-in rate" for purposes of recording interest expense over the life
of the debt instrument the treasury lock hedged.
<PAGE>
Page-18
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
COMPARISON OF OPERATING RESULTS OF GABLES FOR THE SIX MONTHS ENDED JUNE 30, 1998
(THE "1998 PERIOD") TO THE SIX MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD").
Gables' net income is generated primarily from the operation of its apartment
communities. For purposes of evaluating comparative operating performance,
Gables categorizes its operating communities based on the period each community
reaches stabilized occupancy. A community is considered by Gables to have
achieved stabilized occupancy on the earlier to occur of (i) attainment of 93%
physical occupancy or (ii) one year after completion of construction. The
operating performance for all of Gables' apartment communities combined for the
six months ended June 30, 1998 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------- ---------- ---------- -----------
$ %
1998 1997 Change Change
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Rental and other revenue:
Same store communities (1) $59,147 $56,329 $2,818 5.0%
Communities stabilized during the 1998 Period, but not during the 1997 9,677 6,130 3,547 57.9%
Period (2)
Development and lease-up communities (3) 2,802 295 2,507 849.8%
Acquired communities (4) 23,322 361 22,961 6,360.4%
Sold communities (5) 0 175 (175) -100.0%
---------- ---------- ---------- -----------
Total property revenues $94,948 $63,290 $31,658 50.0%
---------- ---------- ---------- -----------
Property operating and maintenance expense (exclusive of depreciation
and amortization):
Same store communities (1) $19,997 $20,046 ($49) -0.2%
Communities stabilized during the 1998 Period, but not during the 1997 3,364 2,218 1,146 51.7%
Period (2)
Development and lease-up communities (3) 660 68 592 870.6%
Acquired communities (4) 8,078 84 7,994 9,516.7%
Sold communities (5) 0 115 (115) -100.0%
---------- ---------- ----------- ----------
Total specified expenses $32,099 $22,531 $9,568 42.5%
---------- ---------- ---------- -----------
Revenues in excess of specified expenses $62,849 $40,759 $22,090 54.2%
---------- ---------- ---------- -----------
Revenues in excess of specified expenses as a percentage of total
property revenues 66.2% 64.4% --- 1.8%
---------- ---------- ---------- -----------
<FN>
(1) Communities which were owned and fully stabilized throughout both the 1998 Period and 1997 Period.
(2) Communities which were completed and fully stabilized during all of the 1998 Period, but were not completed and
fully stabilized during all of the 1997 Period.
(3) Communities in the development/lease-up phase which were not fully stabilized during all or any of the 1998 Period.
(4) Communities which were acquired subsequent to January 1, 1997.
(5) Communities which were sold subsequent to January 1, 1997.
</FN>
</TABLE>
<PAGE>
Page-19
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
Total property revenues increased $31,658, or 50.0%, from $63,290 to $94,948 due
primarily to increases in the number of apartment homes resulting from the
acquisition and development of additional communities and to increases in rental
rates on communities stabilized throughout both periods ("same store"). Below is
additional information regarding the increases in total property revenues for
three of the five community categories presented in the preceding table:
SAME STORE COMMUNITIES:
<TABLE>
<CAPTION>
Percent
Increase Increase
(Decrease) (Decrease) Increase
Number of in Total in Total Occupancy (Decrease)
Number of Apartment Percent Property Property During the in
Market Properties Homes of Total Revenues Revenues 1998 Period Occupancy
- ---------- ------------ ----- -------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Houston 14 5,045 37.7% $1,741 8.2% 95.7% 1.4%
Atlanta 12 3,470 25.9% 371 2.6% 95.7% 1.7%
Dallas 7 1,659 12.4% 481 6.0% 94.6% -0.2%
Nashville 4 1,166 8.7% -54 -1.2% 95.3% -0.7%
Memphis 2 964 7.2% 155 4.6% 95.8% 2.9%
San Antonio 2 544 4.1% 67 2.9% 91.7% 0.0%
Austin 2 532 4.0% 57 2.1% 92.3% -1.8%
----- ------ ------- ------ -------- -------- ------
43 13,380 100.0% $2,818 5.0% 95.2% 1.0%
===== ====== ======= ====== ====== ====== ======
</TABLE>
COMMUNITIES STABILIZED DURING THE 1998 PERIOD BUT NOT DURING THE 1997 PERIOD:
Increase
Number of in Total Occupancy
Number of Apartment Percent Property During the
Market Properties Homes of Total Revenues 1998 Period
- -------- ---------- ------- -------- -------- -----------
Atlanta 4 1,246 61.2% $3,010 94.3%
Memphis 2 490 24.1% 429 92.5%
Dallas 1 300 14.7% 108 90.3%
----- ----- ------ ------- --------
7 2,036 100.0% $3,547 93.3%
===== ===== ====== ======= ========
DEVELOPMENT AND LEASE-UP COMMUNITIES:
Increase
Number of in Total Occupancy
Number of Apartment Percent Property During the
Market Properties Homes of Total Revenues 1998 Period
- -------- ---------- ------- -------- -------- -----------
Austin 2 529 31.5% $1,702 59.5%
Orlando 2 511 30.4% 580 23.8%
Atlanta 1 386 22.9% 114 6.0%
Houston 1 256 15.2% 111 7.2%
----- ----- ------ ------- --------
6 1,682 100.0% $2,507 28.4%
===== ===== ====== ======= ========
<PAGE>
Page-20
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
Other revenues increased $35, or 1.3%, from $2,683 to $2,718 due primarily to an
increase in property management revenues of $366, or 23.7%, from $1,546 to
$1,912 resulting from a net increase of properties managed by Gables for third
parties as a result of the South Florida Acquisition, offset by a decrease in
income from certain ancillary services.
Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $9,568, or 42.5%, from $22,531 to $32,099 due to an
increase in apartment homes resulting from the acquisition and development of
additional communities. Such increase was offset in part by a decrease in
property operating and maintenance expense for same store communities of 0.2%.
The same store decrease in operating expenses represents reduced utilities,
marketing and insurance expenses, offset in part by increased payroll costs and
property taxes.
Depreciation and amortization expense increased $6,901, or 62.6%, from $11,019
to $17,920 due primarily to the acquisition and development of additional
communities.
Property management expense for owned communities and third party properties on
a combined basis increased $1,080, or 39.1%, from $2,760 to $3,840 due primarily
to an increase of 7,500 apartment homes managed from 27,000 in the 1997 Period
to 34,500 in the 1998 Period resulting primarily from the South Florida
Acquisition, in addition to inflationary increases in expenses and certain
non-recurring expense savings in the 1997 Period. Gables allocates property
management expenses to both owned communities and third party properties based
on the proportionate share of total apartment homes and units managed.
General and administrative expense increased $1,019, or 61.6%, from $1,655 to
$2,674 due primarily to (i) compensation and other costs for new positions
associated with the South Florida Acquisition, (ii) increased compensation costs
and (iii) the expensing of internal costs of identifying and acquiring operating
apartment communities effective March 20, 1998 in accordance with EITF No.
97-11.
Interest expense increased $5,284, or 43.3%, from $12,214 to $17,498 due to an
increase in operating debt associated with the acquisition and development of
additional communities, including the debt assumed in connection with the South
Florida Acquisition and the Greystone Acquisition. These increases in interest
expense have been offset in part as a result of the offerings the Company has
consummated between periods, the proceeds of which have been primarily used to
reduce indebtedness.
Loss on treasury lock extension of $2,010 in the 1998 Period represents the loss
recorded, in accordance with GAAP, in connection with the amendment of two
forward treasury lock agreements to extend the termination date. The market rate
in effect on the date of extension is used as the "locked-in rate" for purposes
of recording interest expense over the life of the debt instrument the treasury
lock hedged.
Gain on sale of real estate assets of $4,858 in the 1997 Period represents the
gain generated in connection with the January, 1997 sale of Club Candlewood, a
community comprised of 486 apartment homes.
Extraordinary loss, net in the 1997 Period represents (i) the write-off of
unamortized deferred financing costs and prepaid credit enhancement fees
associated with the defeasance of the tax-exempt bond financing encumbering the
Club Candlewood property that was sold in January, 1997 and (ii) the write-off
of unamortized deferred financing costs associated with the February 28, 1997
retirement of a conventional mortgage note payable that was scheduled to mature
on September 1, 1997. The extraordinary loss totaling $712 is presented net of
the $110 portion of the loss attributable to the minority interest unitholders
in the Operating Partnership.
<PAGE>
Page-21
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Gables' net cash provided by operating activities increased from $24,614 for the
six months ended June 30, 1997 to $39,986 for the six months ended June 30,
1998, due to (i) an increase of $14,910 in income before certain non-cash items
including depreciation, amortization, equity in income of joint ventures,
minority interest of unitholders in Operating Partnership, gain on sale of real
estate assets, long-term compensation expense, loss on treasury lock extension
and net extraordinary losses and (ii) the change in other liabilities between
periods of $7,861. Such increases were offset in part by (i) the change in
restricted cash between periods of $3,252 and (ii) the change in other assets
between periods of $4,147.
Gables' net cash used in investing activities increased from $60,992 for the six
months ended June 30, 1997 to $260,626 for the six months ended June 30, 1998,
due primarily to increased acquisition and development activities in 1998 when
compared to 1997, and the net proceeds from the sale of real estate assets in
1997. During the six months ended June 30, 1998, Gables expended approximately
$174.2 million related to acquisitions of operating apartment communities,
including those acquired in the South Florida Acquisition; $78.1 million related
to development expenditures, including related land acquisitions; approximately
$3.0 million related to recurring, non-revenue enhancing, capital expenditures
for operating apartment communities; and approximately $4.5 million related to
non- recurring, renovation/revenue-enhancing expenditures.
Gables' net cash provided by financing activities increased from $34,945 for the
six months ended June 30, 1997 to $222,208 for the six months ended June 30,
1998 due to increased acquisition and development activities. During the six
months ended June 30, 1998, Gables had net borrowings of $169.1 million which
were used in conjunction with $87.5 million of proceeds from a common share
offering primarily to fund Gables' acquisition and development activities
discussed previously. These proceeds from financing activities were offset in
part by the payment of dividends and distributions totaling approximately $33.9
million.
In June, 1998, the Company issued 3,311 common shares in a direct placement to
five institutional investors. The net proceeds of $87.5 million were used to
reduce borrowings under Gables' Credit Facilities.
Gables elected to be taxed as a REIT under Section 856 through 860 of the
Internal Revenue Code of 1986, as amended, commencing with its taxable year
ended December 31, 1994. REITs are subject to a number of organizational and
operational requirements, including a requirement that they currently distribute
95% of their ordinary taxable income. Provided Gables maintains its
qualification as a REIT, the Company generally will not be subject to Federal
income tax on distributed net income.
As of June 30, 1998, Gables had total indebtedness of $771,400, cash and cash
equivalents of $4,747 and principal escrow deposits reflected in restricted cash
of $2,095. Gables' indebtedness and interest rate protection agreements are
summarized on page 27 of this Form 10-Q. Gables' indebtedness has an average of
6.7 years to maturity at June 30, 1998. Excluding monthly principal amortization
payments, over the next five years Gables has the following scheduled debt
maturities for indebtedness outstanding at June 30, 1998:
1998 $ 36,000
1999 0
2000 0
2001 150,000
2002 127,322
<PAGE>
Page-22
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
The debt maturities in 1998 of $36,000 relate to (i) $25,000 of outstanding
indebtedness under the $25 Million Credit Facility which has unlimited one-year
extension options and (ii) $11,000 of outstanding indebtedness borrowed on an
overnight basis from a commercial bank. The debt maturities in 2001 of $150,000
include $110,000 of outstanding indebtedness under the $225 Million Credit
Facility which has two one-year extension options. The debt maturities in 2002
include $44,930 of tax-exempt bond indebtedness credit-enhanced through a letter
of credit facility which has unlimited one-year extension options.
Gables' dividends through the second quarter of 1998 have been paid from cash
provided by operating activities. Gables anticipates that dividends will
continue to be paid on a quarterly basis from cash provided by operating
activities.
Gables has met and expects to continue to meet its short-term liquidity
requirements generally through net cash provided by operations. Gables' net cash
provided by operations has been adequate and Gables believes that it will
continue to be adequate to meet both operating requirements and payment of
dividends in accordance with REIT requirements. The budgeted expenditures for
improvements and renovations to the communities, in addition to monthly
principal amortization payments, are also expected to be funded from net cash
provided by operations. Gables anticipates construction and development
activities and land purchases will be initially funded primarily through
borrowings under its Credit Facilities described below.
Gables expects to meet certain of its long-term liquidity requirements, such as
scheduled debt maturities, repayment of short-term financing of construction and
development activities and possible property acquisitions, through long- term
secured and unsecured borrowings and the issuance of debt securities or
additional equity securities or through the disposition of assets which, in
management's evaluation, may no longer meet Gables' investment requirements.
$225 MILLION CREDIT FACILITY
In March, 1996, Gables closed a $175 million unsecured revolving credit
facility. In May, 1998, the $175 million commitment level was increased to $225
million and the maturity date was extended to May, 2001 with two one- year
extension options. Gables' availability under the facility is limited to the
lesser of the total $225 million commitment or the borrowing base. The borrowing
base available under the facility is based on the value of Gables' unencumbered
real estate assets as compared to the amount of Gables' unsecured indebtedness.
As of June 30, 1998, Gables had $110 million in borrowings outstanding under the
facility and, therefore, had $115 million of remaining capacity on the $225
million available commitment. Borrowings currently bear interest at LIBOR plus
0.80%. Additionally, a competitive bid option feature is in place for up to 50%
of the total commitment.
$25 MILLION CREDIT FACILITY
In November, 1996, Gables closed an unsecured revolving credit facility that
currently provides for up to $25 million in borrowings. This facility has an
initial term of one year and has unlimited one-year extension options. Gables
has exercised the first of its one-year extension options resulting in a
maturity date for the facility of October, 1998. Borrowings currently bear
interest under this facility at LIBOR plus 0.80%. As of June 30, 1998, Gables
had $25 million of borrowings outstanding under this facility.
<PAGE>
Page-23
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
RESTRICTIVE COVENANTS
Certain of Gables' debt agreements contain customary representations, covenants
and events of default, including covenants which restrict the ability of the
Operating Partnership to make distributions in excess of stated amounts, which
in turn restricts the discretion of the Company to declare and pay dividends. In
general, during any fiscal year the Operating Partnership may only distribute up
to 95% of the Operating Partnership's consolidated income available for
distribution (as defined in the related agreement) exclusive of distributions of
capital gains for such year. The applicable debt agreements contain exceptions
to these limitations to allow the Operating Partnership to make any
distributions necessary to allow the Company to maintain its status as a REIT.
Gables does not anticipate that this provision will adversely effect the ability
of the Operating Partnership to make distributions or the Company to declare
dividends, as currently anticipated.
<PAGE>
Page-24
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
Development Communities at June 30, 1998
Certain information regarding Gables' communities under development at June 30,
1998 is presented below.
<TABLE>
<CAPTION>
Actual or Estimated Quarter of
Number of Total Percent at June 30, 1998 ----------------------------------------------------
Apartment Budgeted ------------------------------ Construction Initial Construction Stabilized
Community Homes Cost Complete Leased Occupied Start Occupancy End Occupancy
- --------- ---------- ---------- -------- ------ -------- ------------ --------- ------------ ----------
(Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ATLANTA, GA
Gables at Sugarloaf .. 386 $ 28.7 84% 34% 26% 2 Q 1997 1 Q 1998 1 Q 1999 3 Q 1999
Gables Metropolitan I 435 49.7 -- -- -- 2 Q 1998 3 Q 1999 3 Q 2000 4 Q 2000
AUSTIN, TX
Gables Bluffstone .... 256 19.6 99% 73% 60% 1 Q 1997 4 Q 1997 3 Q 1998 4 Q 1998
HOUSTON, TX
Gables New Territory . 256 15.2 96% 50% 34% 3 Q 1997 2 Q 1998 4 Q 1998 2 Q 1999
ORLANDO, FL
The Commons at
Little Lake Bryan I 280 21.7 98% 100% 91% 2 Q 1997 1 Q 1998 3 Q 1998 3 Q 1998
Gables Celebration ... 231 24.6 55% 67% 16% 3 Q 1997 2 Q 1998 1 Q 1999 1 Q 1999
----- ------
Totals ............. 1,844 $ 159.5
===== ======
<FN>
The following is a "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of
1934, as amended. The projections and estimates contained in the table above are
forward-looking statements. These forward-looking statements involve risks and
uncertainties and actual results may differ materially from those projected in
such statements. Risks associated with Gables' development, construction, and
lease-up activities, which could impact the forward-looking statements made,
include: development opportunities may be abandoned; construction costs of a
community may exceed original estimates, possibly making the community
uneconomical; and construction and lease-up may not be completed on schedule,
resulting in increased debt service and construction costs.
Total Budgeted Cost includes all capitalized costs incurred and projected to be
incurred to develop the respective community presented in accordance with
generally accepted accounting principles, including land acquisition costs,
construction costs, real estate taxes, interest and loan fees, permits,
professional fees, allocated development overhead, and other regulatory fees.
Stabilized occupancy is defined as the earlier to occur of (i) 93% physical
occupancy or (ii) one year after completion of construction.
</FN>
</TABLE>
<PAGE>
Page-25
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
STABILIZED APARTMENT COMMUNITIES AT JUNE 30, 1998
6/30/98 Scheduled Rent Per
Number of 6/30/98 --------------------------
Community Homes Occupancy Unit Square Foot
- ---------- ------- ----------- ------ -----------
HOUSTON, TX
Austin Colony .................. 237 95% $ 836 $ 0.86
Baybrook Village ............... 776 98% 580 0.73
Gables Bradford Place .......... 372 95% 746 0.87
Gables Bradford Pointe ......... 360 97% 647 0.84
Gables Champions ............... 404 97% 797 0.88
Gables CityPlaza ............... 246 98% 885 1.00
Gables Cityscape ............... 252 98% 921 1.08
Gables CityWalk/Waterford Square 317 99% 904 1.12
Gables Edgewater ............... 292 94% 832 0.94
Gables Meyer Park .............. 345 98% 862 1.00
Gables of First Colony ......... 324 93% 931 0.94
Gables Piney Point ............. 246 98% 930 1.00
Gables Pin Oak Green ........... 582 96% 974 0.96
Gables Pin Oak Park ............ 477 97% 1,003 0.98
Gables River Oaks .............. 228 98% 1,413 1.16
Lions Head ..................... 277 97% 753 0.89
Metropolitan Uptown (JV)........ 318 96% 1,010 1.11
Rivercrest I ................... 140 96% 744 0.88
Rivercrest II .................. 140 96% 742 0.88
Westhollow Park ................ 412 97% 645 0.72
Windmill Landing ............... 259 92% 691 0.80
------ ------ ----- ------
7,004 96% 833 0.92
ATLANTA, GA
Briarcliff Gables .............. 104 98% 1,081 0.87
Buckhead Gables ................ 162 98% 808 1.07
Dunwoody Gables ................ 311 98% 799 0.86
Gables Cinnamon Ridge .......... 200 94% 658 0.69
Gables Cityscape ............... 192 97% 816 0.98
Gables Heights ................. 213 86% 1,194 0.96
Gables Northcliff .............. 82 100% 1,113 0.71
Gables Over Peachtree .......... 263 98% 1,009 1.11
Gables Vinings ................. 315 96% 959 0.90
Gables Walk .................... 310 94% 1,025 0.87
Gables Wood Arbor .............. 140 98% 703 0.77
Gables Wood Crossing ........... 268 99% 716 0.75
Gables Wood Glen ............... 380 92% 684 0.69
Gables Wood Knoll .............. 312 97% 718 0.72
Gables Mill .................... 438 96% 826 0.89
Lakes at Indian Creek .......... 603 93% 570 0.62
Rock Springs Estates ........... 295 96% 874 0.86
Roswell Gables I ............... 384 96% 824 0.76
Roswell Gables II .............. 284 96% 824 0.70
Spalding Gables ................ 252 96% 835 0.84
Wildwood Gables ................ 546 97% 844 0.74
------ ------- ----- ------
6,054 96% 821 0.80
BOCA RATON, FL
Boca Place ..................... 180 86% 861 0.88
Cotton Bay ..................... 444 94% 696 0.71
Hampton Lakes .................. 300 91% 756 0.71
Hampton Place .................. 368 92% 721 0.75
Kings Colony ................... 480 94% 723 0.81
Mahogany Bay ................... 328 97% 746 0.74
Mizner on the Green ............ 246 96% 1,547 1.22
San Michele .................... 249 93%(A) 1,368 1.02
San Remo ....................... 180 91% 1,229 0.67
Town Colony .................... 172 93% 852 0.99
Vinings at Boynton Beach ....... 252 89% 854 0.71
Vinings at Boynton Beach II .... 296 93%(A) 887 0.73
Vinings at Hampton Village ..... 168 92% 802 0.66
Vinings at Town Place .......... 312 91% 832 1.00
Vinings at Wellington .......... 222 93%(A) 967 0.72
------ ------- ----- ------
4,197 93% 887 0.81
<PAGE>
Page-26
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
STABILIZED APARTMENT COMMUNITIES AT JUNE 30, 1998
(continued from previous page)
6/30/98 Scheduled Rent Per
Number of 6/30/98 --------------------------
Community Homes Occupancy Unit Square Foot
- ---------- ------- ----------- ------ -----------
DALLAS, TX
Arborstone ............. 536 96% $ 495 $ 0.69
Gables at Pearl Street . 108 97% 1,415 1.30
Gables CityPlace ....... 232 96% 1,380 1.31
Gables Green Oaks ...... 300 92% 832 0.87
Gables Mirabella ....... 126 97% 1,229 1.35
Gables Preston ......... 126 94% 1,068 0.97
Gables Spring Park ..... 188 96% 952 0.90
Gables Turtle Creek .... 150 93% 1,215 1.21
Gables Valley Ranch .... 319 95% 933 0.91
------ ------ ----- ------
2,085 95% 929 0.99
MEMPHIS, TN
Arbors of Harbortown(JV). 345 94% 846 0.86
Gables Cordova ......... 464 95% 684 0.73
Gables Germantown ...... 252 95% 919 0.79
Gables Quail Ridge ..... 238 97% 834 0.70
Gables Stonebridge ..... 500 98% 680 0.77
------ ------ ----- ------
1,799 96% 767 0.77
NASHVILLE, TN
Brentwood Gables ....... 254 94% 866 0.77
Gables Hendersonville .. 364 96% 641 0.68
Gables Hickory Hollow I 272 93% 622 0.68
Gables Hickory Hollow II 276 93% 622 0.66
------ ------- ----- ------
1,166 94% 681 0.70
AUSTIN, TX
Gables Central Park .... 273 98% 1,113 1.18
Gables Great Hills ..... 276 100% 793 0.96
Gables Park Mesa ....... 148 95% 1,092 1.00
Gables Town Lake ....... 256 98% 1,123 1.20
------ ------- ----- ------
953 98% 1,020 1.10
SAN ANTONIO, TX
Gables Colonnade I ..... 312 94% 789 0.87
Gables Wall Street ..... 232 98% 802 0.84
------ ------- ----- ------
544 95% 794 0.86
TOTALS .............. 23,802 95% $ 842 $ 0.86
====== ======= ===== ======
(A) These properties were acquired April 1, 1998 and are currently in the
lease-up phase. An occupancy rate of 93% is disclosed as a stabilized net
operating income level has been guaranteed by the seller through December
31, 1998. At June 30, 1998, the actual occupancy rate for each property was
89%, 86% and 46%, respectively.
<PAGE>
Page-27
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
PORTFOLIO INDEBTEDNESS SUMMARY AND INTEREST RATE PROTECTION AGREEMENT SUMMARY
A summary of Gables' portfolio indebtedness and interest rate protection
agreements as of June 30, 1998 follows:
Portfolio Indebtedness Summary
- ------------------------------
Percentage Interest Total Years to
Type of Indebtedness Balance of Total Rate (A) Rate (B) Maturity
- -------------------- ------- -------- -------- -------- --------
Fixed-rate:
Secured notes $126,439 16.4% 7.80% 7.80% 10.38
Unsecured notes (C) 258,161 33.5% 7.40% 7.40% 5.95
Tax-exempt 90,730 11.7% 6.02% 6.32% 9.29
-------- ----- ------ ------ -----
Total fixed-rate $475,330 61.6% 7.24% 7.30% 7.77
-------- ----- ------ ------ -----
Tax-exempt variable-rate $150,070 19.5% 3.55% 4.54% 7.68
-------- ----- ------ ------ -----
Unsecured credit facilities $146,000 18.9% 6.30% 6.30% 2.18
-------- ----- ------ ------ -----
Total portfolio debt(D),(E) $771,400 100.0% 6.35% 6.57% 6.69
======== ====== ====== ====== =====
(A) Interest Rate represents the weighted average interest rate incurred on the
indebtedness, exclusive of deferred financing cost amortization and credit
enhancement fees, as applicable.
(B) Total Rate represents the Interest Rate (A) plus credit enhancement fees,
as applicable.
(C) Unsecured conventional fixed-rate debt includes $40,000 of financing which
bears interest at LIBOR plus a spread of 0.80%. Such financing is
effectively fixed at an all-in rate of 6.15% after the application of
$40,000 of the $44,530 interest rate cap and swap arrangements described
below.
(D) Interest associated with construction activities is capitalized as a cost
of development and does not impact current earnings. The qualifying
construction expenditures at June 30, 1998 for purposes of interest
capitalization were $126,167.
(E) Excludes $16.4 million of tax-exempt bonds and $17.9 million of outstanding
conventional indebtedness related to joint ventures in which Gables owns a
25% interest.
INTEREST RATE PROTECTION AGREEMENT SUMMARY
Notional Strike/Swap/ Effective Termination
Description of Agreement Amount Lock Price Date Date
LIBOR, 30-day - "Rate Cap" $44,530 6.25% (F) 01/27/94 01/30/99
LIBOR, 30-day - "Rate Swap" $44,530 5.35% (F) 08/30/96 08/30/99(G)
LIBOR, 30-day - "Rate Swap" $25,000 5.76% (F) 02/27/98 02/27/00(H)
Treasury, 7-year - "Treasury Lock" $50,000 6.24% 09/22/97 08/21/98
(F) The 30-day LIBOR rate in effect at June 30, 1998 was 5.69%.
(G) This is a knock-out swap agreement which fixes Gables' underlying 30-day
LIBOR rate at 5.35%. The swap terminates upon the earlier to occur of (i)
the termination date or (ii) a rate reset date on which the 30-day LIBOR
rate is 6.26% or higher.
(H) This is a knock-out swap agreement which fixes Gables' underlying 30-day
LIBOR rate at 5.76%. The swap terminates upon the earlier to occur of (i)
the termination date or (ii) a rate reset date on which the 30-day LIBOR
rate is 6.70% or higher.
<PAGE>
Page-28
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
BOOK VALUE OF ASSETS AND SHAREHOLDERS' EQUITY
The application of historical cost accounting in accordance with GAAP for
Gables' UPREIT structure results in an understatement of total assets and
shareholders' equity compared to the amounts that would be recorded via the
application of purchase accounting in accordance with GAAP had Gables not been
organized as an UPREIT. Management believes it is imperative to understand this
difference when evaluating the book value of assets and shareholders' equity.
The understatement of basis related to this difference in organizational
structure at June 30, 1998 is $112,494, exclusive of the effect of depreciation.
Accordingly, on a pro forma basis, the real estate assets before accumulated
depreciation, total assets and total shareholders' equity plus minority interest
and Series Z Preferred Shares at liquidation value as of June 30, 1998 would be
$1,692,751, $1,611,559, and $790,528, respectively, if such $112,494 value were
reflected.
INFLATION
Substantially all of Gables' leases at the communities are for a term of one
year or less, which may enable Gables to seek increased rents upon renewal of
existing leases or commencement of new leases in times of rising prices. The
short-term nature of these leases generally serves to lessen the impact of cost
increases arising from inflation.
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
This Report on Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The words "believe," "expect,"
"anticipate," "intend," "estimate," "assume" and other similar expressions which
are predictions of or indicate future events and trends and which do not relate
solely to historical matters identify forward-looking statements. Reliance
should not be placed on forward-looking statements because they involve known
and unknown risks, uncertainties and other factors, which are in some cases
beyond the control of Gables and may cause the actual results, performance or
achievements of Gables to differ materially from anticipated future results,
performance or achievements expressed or implied by such forward-looking
statements.
Factors that might cause such a difference include, but are not limited to, the
following: Gables may fail to secure or abandon development opportunities;
construction costs of a community may exceed original estimates; construction
and lease-up may not be completed on schedule, resulting in increased debt
service expense and construction costs and reduced rental revenues; occupancy
rates and market rents may be adversely affected by local economic and market
conditions which are beyond management's control; financing may not be
available, or may not be available on favorable terms; Gables' cash flow may be
insufficient to meet required payments of principal and interest; and existing
indebtedness may mature in an unfavorable credit environment, preventing such
indebtedness from being refinanced, or, if financed, causing such refinancing to
occur on terms that are not as favorable as the terms of existing indebtedness.
OTHER MATTERS
Gables has assessed the impact of the year 2000 issue on its computer systems
and is in the process of remediating the affected hardware and software. The
year 2000 issue is the result of many computer programs recognizing a date
ending with "00" as the year 1900 rather than the year 2000, causing potential
system failures or miscalculations which could result in disruptions of normal
business operations. Gables' primary financial and operating systems are
supplied by third party suppliers and its hardware and software systems are
either currently year 2000 compliant or will be compliant well in advance of
January 1, 2000. Gables' costs of addressing the year 2000 issue are not
expected to be material and will relate primarily to costs of existing
information system personnel. However, no estimates can be made as to the
potential adverse impact resulting from the failure of third party service
providers and vendors to prepare for the year 2000 issue. Gables is attempting
to identify those risks as well as to receive compliance certificates from all
third parties that have a material impact on Gables' operations.
<PAGE>
Page-29
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Amounts)
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCUSSION - Funds From Operations and Adjusted Funds From
Operations
Gables considers funds from operations ("FFO") to be a useful performance
measure of the operating performance of an equity REIT because, together with
net income and cash flows, FFO provides investors with an additional basis to
evaluate the ability of a REIT to incur and service debt and to fund
acquisitions and other capital expenditures. Gables believes that in order to
facilitate a clear understanding of its operating results, FFO should be
examined in conjunction with net income as presented in the financial statements
and data included elsewhere in this report. Gables computes FFO in accordance
with standards established by the National Association of Real Estate Investment
Trusts ("NAREIT"). FFO as defined by NAREIT represents net income (loss)
determined in accordance with GAAP, excluding gains or losses from sales of
assets or debt restructuring, plus certain non-cash items, primarily real estate
depreciation, and after adjustments for unconsolidated partnerships and joint
ventures. FFO presented herein is not necessarily comparable to FFO presented by
other real estate companies due to the fact that not all real estate companies
use the same definition. However, Gables' FFO is comparable to the FFO of real
estate companies that use the NAREIT definition. Adjusted funds from operations
("AFFO") is defined as FFO less capital expenditures funded by operations. FFO
and AFFO should not be considered as alternatives to net income as indicators of
Gables' operating performance or as alternatives to cash flows as measures of
liquidity. FFO does not measure whether cash flow is sufficient to fund all of
Gables' cash needs including principal amortization, capital expenditures, and
distributions to shareholders and unitholders. Additionally, FFO does not
represent cash flows from operating, investing or financing activities as
defined by GAAP. Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
for a discussion of Gables' cash needs and cash flows. A reconciliation of funds
from operations and adjusted funds from operations follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income available to common shareholders ............. $ 7,120 $ 6,706 $ 12,873 $ 16,514
Extraordinary loss, net of minority interest ............ 0 0 0 602
Minority interest of unitholders in Operating Partnership 2,192 1,219 3,251 3,119
Loss on treasury lock extension (1) ..................... 199 0 2,010 0
Amortization of loss on treasury lock extension (1) ..... (46) 0 (50) 0
Gain on sale of real estate assets ...................... 0 0 0 (4,858)
Real estate asset depreciation:
Wholly-owned real estate assets .................. 10,210 5,553 17,694 10,786
Joint venture real estate assets ................. 56 56 112 111
-------- -------- ------- --------
Total ................................... 10,266 5,609 17,806 10,897
-------- -------- ------- --------
FUNDS FROM OPERATIONS ................................... $ 19,731 $ 13,534 $ 35,890 $ 26,274
-------- -------- ------- --------
Capital expenditures for operating apartment communities:
Carpet ............................................ 709 401 1,152 772
Roofing ........................................... 18 81 34 105
Exterior painting ................................. 0 56 0 56
Appliances ........................................ 109 38 157 85
Other additions and improvements .................. 1,090 569 1,707 1,042
-------- -------- ------- --------
Total .................................... 1,926 1,145 3,050 2,060
-------- -------- ------- --------
ADJUSTED FUNDS FROM OPERATIONS .......................... $ 17,805 $ 12,389 $ 32,840 $ 24,214
======== ======== ======= ========
<FN>
(1) Gables recorded a loss upon extension of its forward treasury lock
agreements. The loss recognized for GAAP purposes in connection with such
extension is added back for FFO purposes as Gables accounts for such amount
for FFO purposes as a finance cost which will be amortized over the life of
the debt transaction for which the treasury lock hedged.
</FN>
</TABLE>
<PAGE>
Page-30
Part II - Other Information
Item 1: Legal Proceedings
None
Item 2: Changes in Securities
On April 1, 1998, the Operating Partnership issued 2,348,416
Units (valued at approximately $64,875,000 at the time of
issuance) in connection with the South Florida Acquisition. Such
Units were issued in reliance on an exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated
thereunder.
On April 14, 1998 and April 22, 1998, the Operating Partnership
issued 534,699 and 112,010 Units, respectively, (valued at
approximately $17,505,604 at the time of issuance) in connection
with the Greystone Acquisition. Such Units were issued in
reliance on an exemption from registration under Section 4(2) of
the Securities Act and the rules and regulations promulgated
thereunder.
On May 19, 1998, the shareholders approved the amendment to the
Company's Amended and Restated Declaration of Trust increasing
the authorized preferred shares of beneficial interest, par value
$0.01 per share, from 10,000,000 to 20,000,000.
On June 18, 1998, the Company issued 180,000 shares of 5.00%
Series Z Cumulative Redeemable Preferred Shares (liquidation
preference $25.00 per share) (the "Series Z Preferred Shares").
The Series Z Preferred Shares, which may be redeemed by the
Company at $25.00 per share, plus accrued and unpaid dividends,
at any time, are subject to mandatory redemption on June 18,
2018. The Series Z Preferred Shares are not subject to a sinking
fund and are not convertible into any other securities of the
Company.
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on May 19,
1998. The shareholders voted to elect (i) Marcus E. Bromley and
David M. Holland to serve as Class I Trustees of the Company
until their terms expire in 2001 and their respective successors
are duly elected and (ii) D. Raymond Riddle and Chris D. Wheeler
to serve as Class II Trustees of the Company until their terms
expire in 1999 and their respective successors are duly elected.
The votes cast for, and withheld from, the election of the
aforementioned trustees are listed below:
Votes Votes
Cast For Withheld From
------------ -------------
Marcus E. Bromley 19,888,443 53,138
David M. Holland 19,887,767 53,814
D. Raymond Riddle 19,883,511 58,070
Chris D. Wheeler 19,885,065 56,516
The shareholders also voted to approve the amendment to the
Gables Residential Trust Second Amended and Restated 1994 Share
Option and Incentive Plan described in the Proxy Statement.
7,470,378 votes were cast in favor of this proposal, 5,820,657
votes were cast against it, 143,416 abstained and 6,507,131 were
broker non-votes.
The shareholders also voted to approve the amendment to the
Amended and Restated Declaration of Trust of Gables Residential
Trust increasing the number of authorized preferred shares of
beneficial interest, par value $0.01 per share, from 10,000,000
to 20,000,000. 11,166,834 votes were cast in favor of this
proposal, 2,146,155 votes were cast against it, 121,462 abstained
and 6,507,131 were broker non-votes.
<PAGE>
Page-31
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 * Articles of Amendment to the Company's Amended and
Restated Declaration of Trust increasing the number of
preferred shares of beneficial interest, par value
$0.01 per share, which the Company has authority to
issue from 10,000,000 to 20,000,000 as approved at the
annual meeting of shareholders on May 19, 1998.
3.2 * Articles Supplementary to the Company's Amended and
Restated Declaration of Trust creating a series of
preferred shares of beneficial interest, par value
$0.01 per share, called the 5.00% Series Z Cumulative
Redeemable Preferred Shares.
10.1 * Third Amended and Restated Agreement of Limited
Partnership of the Operating Partnership.
10.2 * $225,000,000 Amended and Restated Credit Agreement
dated as of May 13, 1998 by and among Gables Realty
Limited Partnership (as Borrower) and Wachovia Bank,
N.A., First Union National Bank, Chase Bank of Texas,
National Association, PNC Bank, National Association,
Guaranty Federal Bank, F.S.B., AmSouth Bank of Alabama
and Commerzbank AG, Atlanta Agency (collectively, as
lenders) and Wachovia Bank, N.A. (as Agent).
10.3 * Forward Treasury Lock Agreement (notional amount of
$50,000,000) between Gables Realty Limited Partnership
and J.P. Morgan Securities Inc., dated as of September
22, 1997 and amended on May 28, 1998.
10.4 * Forward Treasury Lock Agreement (notional amount of
$50,000,000) between Gables Realty Limited Partnership
and J.P. Morgan Securities Inc., dated as of September
22, 1997 and amended on July 24, 1998.
10.5 * Third Amended and Restated 1994 Share Option and
Incentive Plan.
27 * Financial Data Schedule
----------------------------------
* Filed herewith
(b) Reports on Form 8-K
(i) A Form 8-K dated April 1, 1998 was filed with the
Securities and Exchange Commission in connection with
Gables' April 1, 1998 acquisition of 15 multifamily
apartment communities and TCR's residential
construction and development and third party management
activities in South Florida (the "South Florida
Acquisition").
<PAGE>
Page-32
(ii) Amendment No. 1 to the Form 8-K dated April 1, 1998 on
Form 8-K/A was filed with the Securities and Exchange
Commission with the required financial information
regarding Gables' April 1, 1998 South Florida
Acquisition.
(iii)A Form 8-K dated June 18, 1998 was filed with the
Securities and Exchange Commission in connection with
the Company's issuance of 3,310,800 common shares of
beneficial interest directly to five institutional
investors.
<PAGE>
Page-33
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 13, 1998 GABLES RESIDENTIAL TRUST
/s/ Marvin R. Banks, Jr.
---------------------------------
Marvin R. Banks, Jr.
Senior Vice President and Chief
Financial Officer
(Authorized Officer of the Registrant
and Principal Financial Officer)
GABLES RESIDENTIAL TRUST
ARTICLES OF AMENDMENT
GABLES RESIDENTIAL TRUST, a Maryland real estate investment trust (the
"Trust"), having its principal office in Atlanta, Georgia, hereby certified to
the State Department of Assessments and Taxation of the State of Maryland (the
"Department") that :
FIRST: The Trust's Amended and Restated Declaration of Trust, as
supplemented by the Articles Supplementary filed with the Department on July 23,
1997 (the "Charter"), is hereby amended by deleting Section 4.1 of the Charter
in its entirety and inserting in lieu thereof the following:
"SECTION 4.1 Authorized Shares. The beneficial interest in the Trust shall
be divided into Shares. The total number of Shares which the Trust has authority
to issue is one hundred and seventy-one million (171,000,000) shares, consisting
of (i) twenty million (20,000,000) preferred shares of beneficial interest, par
value $.01 per share ("Preferred Shares"); (ii) one hundred million
(100,000,000) common shares of beneficial interest, par value $.01 per share
("Common Shares"); and (iii) fifty-one million (51,000,000) excess shares of
beneficial interest, par value $.01 per share ("Excess Shares")."
SECOND: By unanimous written consent in lieu of a meeting of the Board of
Trustees of the Trust (the "Board") dated as of March 16, 1998, the Board duly
adopted resolutions (i) setting forth the foregoing amendment, (ii) declaring
that such amendment was advisable and in the best interest of the Trust and
(iii) directing that such amendment be submitted for consideration at the
Trust's annual meeting of shareholders.
THIRD: At the Trust's annual meeting of shareholders on May 19, 1998, the
foregoing amendment was duly approved by the shareholders entitled to vote
thereon.
FOURTH: The foregoing amendment has been duly advised by the Board and
approved by shareholders of the Trust.
FIFTH: Immediately before these Articles of Amendment the Trust had
authority to issue 161,000,000 shares consisting of (i) 10,000,000 preferred
shares of beneficial interest, par value $.01 per share, (ii) 100,000,000 common
shares of beneficial interest, par value $.01 per share, and (iii) 51,000,000
excess shares of beneficial interest, par value $.01 per share, with a total
aggregate par value of $1,610,000.
<PAGE>
As amended by these Articles of Amendment, under the Charter the Trust has
authority to issue 171,000,000 shares consisting of (i) 20,000,000 preferred
shares of beneficial interest, par value $.01 per share, (ii) 100,000,000 common
shares of beneficial interest, par value $.01 per share, and (iii) 51,000,000
excess shares of beneficial interest, par value $.01 per share, with a total
aggregate par value of $1,710,000.
SIXTH: The information required by subsection (b)(2)(i) of Section 2-607 of
the Maryland General Corporation Law was not changed by the foregoing amendment.
IN WITNESS WHEREOF, GABLES RESIDENTIAL TRUST has caused these presents to
be signed in its name and on its behalf by its Chairman and Chief Executive
Officer on May 22,1998.
GABLES RESIDENTIAL TRUST
By: /s/ Marcus E. Bromley
---------------------------------
Marcus E. Bromley
Trustee, Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Marvin R. Banks, Jr.
- -------------------------------
Marvin R. Banks, Jr.
Secretary
THE UNDERSIGNED, as Trustee, Chairman of the Board and Chief Executive
Officer of Gables Residential Trust, who executed on behalf of the Trust the
foregoing Articles of Amendment of which this Certificate is made a part, hereby
acknowledges in the name and on behalf of said Trust the foregoing Articles of
Amendment to be the act of said Trust and hereby certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth herein
with respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ Marcus E. Bromley
----------------------------------
Marcus E. Bromley
Trustee, Chairman of the Board and
Chief Executive Officer
<PAGE>
GABLES RESIDENTIAL TRUST
ARTICLES SUPPLEMENTARY
ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF A SERIES OF PREFERRED SHARES
Gables Residential Trust, a Maryland real estate investment trust (the
"Trust"), having its principal office in Atlanta, Georgia, hereby certifies to
the State Department of Assessments and Taxation of the State of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board of Trustees
of the Trust by Article IV of its Amended and Restated Declaration of Trust
(which, as hereafter restated or amended from time to time, are together with
these Articles Supplementary herein called the "Charter"), the Board of Trustees
has, by resolution, duly divided and classified 180,000 shares of the Preferred
Shares of the Trust into a series designated 5.00% Series Z Cumulative
Redeemable Preferred Shares and has provided for the issuance of such series.
SECOND: Subject in all cases to the provisions of the Charter of the Trust,
including without limitation, Article V with respect to limitations on the
transfer and ownership of Shares, the following is a description of the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of the 5.00% Series Z Cumulative Redeemable Preferred Shares of the
Trust:
1. DESIGNATION AND NUMBER.
A series of Preferred Shares, designated the "5.00% Series Z Cumulative
Redeemable Preferred Shares" (the "Series Z Preferred Shares"), is hereby
established. The number of Series Z Preferred Shares hereby authorized shall be
180,000.
2. RANK.
The Series Z Preferred Shares shall, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the Trust, rank junior to
all other classes or series of capital stock of the Trust (including other
classes or series of equity securities) except that (a) as to the distribution
of assets upon liquidation, dissolution or winding up, the Series Z Preferred
Shares shall rank senior to the Common Shares, (b) as to the payment of
dividends, from and after the First Payment Date (as defined below) the Series Z
Preferred Shares shall rank senior to the Common Shares, and (c) as to the
distribution of assets upon liquidation, dissolution or winding up, and as to
the payment of dividends, any class or series which by its terms specifies that
it shall rank junior to or on a parity with Series Z Preferred Shares shall rank
junior or pari passu, as the case may be.
<PAGE>
3. DIVIDENDS.
A. Holders of the then outstanding Series Z Preferred Shares shall be
entitled to receive, when and as declared by the Board of Trustees, out of
funds legally available for the payment of dividends, cumulative
preferential cash dividends at the rate of 5.00% of the $25.00 liquidation
preference per annum (equivalent to a fixed annual amount of $1.25 per
share). Such dividends shall be cumulative from the date of original issue.
Such dividends shall be payable in arrears on or before June 18 of each
year, or, if not a business day, the next succeeding business day (each, a
"Dividend Payment Date"); provided, however, that no dividends shall be
paid until June 18, 2008 (the "First Payment Date") and until such date all
dividends shall accumulate. On the First Payment Date, each holder of a
Series Z Preferred Share shall be entitled to receive, subject to
declaration by the Board of Trustees out of funds legally available for the
payment of dividends, in respect of such share, cumulative dividends in the
amount of $12.50. The annual period between Dividend Payment Dates is
referred to herein as a "dividend period" and the dividend which shall
accrue in respect of any full dividend period shall be $1.25 regardless of
the actual number of days in such full dividend period. Any dividend
payable on the Series Z Preferred Shares for any partial dividend period
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends will be payable to holders of record as they appear in
the stock records of the Trust at the close of business on the applicable
record date, which shall be the first day of the calendar month in which
the applicable Dividend Payment Date falls or on such other date designated
by the Board of Trustees of the Trust as the record date for the payment of
dividends on the Series Z Preferred Shares that is not more than 30 nor
less than 10 days prior to such Dividend Payment Date (each, a "Dividend
Record Date").
B. No dividends on Series Z Preferred Shares shall be declared by the
Board of Trustees of the Trust or paid or set apart for payment by the
Trust at such time as the terms and provisions of any agreement of the
Trust, including any agreement relating to its indebtedness, prohibits such
declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law. However, the Company (i) represents that
no such instrument in effect on the date of original issue prohibits such
payment prior to the occurrence of an event of default or unless such
payment would give rise to an event of default thereunder and (ii) agrees
that after the date of original issue, and so long as any Series Z
Preferred Shares remain outstanding, it will not enter into any such
instrument that prohibits such payment prior to the occurrence of an event
of default or unless such payment would give rise to an event of default
thereunder. In addition, no dividends on Series Z Preferred Shares shall be
paid or set apart for payment by the Trust at any time that the Trust has
accrued and unpaid dividends due on the equity securities of any other
class or series, except a class or series which by its terms specifies that
it ranks junior to or on a parity with the Series Z Preferred Shares as to
the payment of dividends.
<PAGE>
C. Notwithstanding the foregoing, dividends on the Series Z Preferred
Shares shall accrue whether or not the terms and provisions set forth in
Section 3(b) hereof at any time prohibit the current payment of dividends,
whether or not the Trust has earnings, whether or not there are funds
legally available for the payment of such dividends and whether or not such
dividends are declared. Accrued but unpaid dividends on the Series Z
Preferred Shares will accumulate as of the Dividend Payment Date on which
they first become payable.
D. When dividends are not paid in full (and a sum sufficient for such
full payment is not so set apart) upon the Series Z Preferred Shares, all
dividends declared upon the Series Z Preferred Shares shall be declared pro
rata so that the amount of dividends declared per share of Series Z
Preferred Shares shall in all cases bear to each other the same ratio that
accrued dividends per share on the Series Z Preferred Shares bear to each
other. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on Series Z Preferred Shares
which may be in arrears.
E. After the First Payment Date, unless full cumulative dividends on
the Series Z Preferred Shares have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof is set
apart for payment for all past dividend periods, no dividends (other than
in Common Shares or other shares of beneficial interest ranking junior to
the Series Z Preferred Shares as to dividends and upon liquidation) shall
be declared or paid or set aside for payment, nor shall any other
distribution be declared or made, upon the Common Shares or any other
shares of beneficial interest of the Trust ranking junior to or on a parity
with the Series Z Preferred Shares as to dividends or upon liquidation, nor
shall any Common Shares, or any other shares of beneficial interest of the
Trust ranking junior to or on a parity with the Series Z Preferred Shares
as to dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any such shares) by the Trust
(except by conversion into or exchange for other shares of beneficial
interest of the Trust ranking junior to the Series Z Preferred Shares as to
dividends and upon liquidation).
<PAGE>
F. Holders of the Series Z Preferred Shares shall not be entitled to
any dividend, whether payable in cash, property or securities in excess of
full cumulative dividends on the Series Z Preferred Shares as described
above.
4. LIQUIDATION PREFERENCE.
A. Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Trust, the holders of Series Z Preferred
Shares then outstanding are entitled to be paid out of the assets of the
Trust legally available for distribution to its stockholders a liquidation
preference of $25.00 per share, plus an amount equal to any accrued and
unpaid dividends to the date of payment computed on the basis of a 360-day
year consisting of twelve 30-day months, before any distribution of assets
is made to holders of Common Shares or any other class or series of shares
of beneficial interest of the Trust that ranks junior to the Series Z
Preferred Shares as to liquidation rights.
B. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Trust
are insufficient to pay the amount of the liquidating distributions on all
outstanding Series Z Preferred Shares and the corresponding amounts payable
on all shares of other classes or series of shares of beneficial interest
of the Trust ranking on a parity with the Series Z Preferred Shares in the
distribution of assets, then the holders of the Series Z Preferred Shares
and all other such classes or series of shares of beneficial interest shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
C. After payment of the full amount of the liquidating distributions
to which they are entitled, the holders of Series Z Preferred Shares will
have no right or claim to any of the remaining assets of the Trust.
D. Written notice of any such liquidation, dissolution or winding up
of the Trust, stating the payment date or dates when, and the place or
places where, the amounts distributable in such circumstances shall be
payable, shall be given by first class mail, postage pre-paid, not less
than 30 nor more than 60 days prior to the payment date stated therein, to
each record holder of the Series Z Preferred Shares at the respective
addresses of such holders as the same shall appear on the stock transfer
records of the Trust.
E. The consolidation or merger of the Trust with or into any other
corporation, trust or entity or of any other corporation with or into the
Trust, or the sale, lease or conveyance of all or substantially all of the
property or business of the Trust, shall not be deemed to constitute a
liquidation, dissolution or winding up of the Trust.
5. REDEMPTION.
A. Right of Optional Redemption; Application of "Excess Share"
Provision. In an effort to ensure that the Trust remains a qualified real
estate investment trust ("REIT") for federal income tax purposes, the
Charter provides that Series Z Preferred Shares are, together with all
other shares of beneficial interest of the Trust, subject in all respects
to the provisions of Article V of the Charter. In addition, for so long as
any Series Z Preferred Shares are outstanding, the definition of "Ownership
Limit" in Article V shall be read so that the following clause is appended
to the end thereto: "and provided, further, that so long as any Series Z
Preferred Shares are outstanding, "Ownership Limit" shall also mean 9.8% of
the outstanding Series Z Preferred Shares." Accordingly, pursuant to
Sections 5.5.1 and 5.5.7 of the Charter, a purported Transfer (as defined
in Article V) of Series Z Preferred Shares as a result of which any person
would Beneficially Own (as defined in Article V) more than 9.8% of the
outstanding Series Z Preferred Shares will cause such excess to
automatically be exchanged for Excess Shares, and the Trust will have the
right to purchase such Excess Shares from the holder. Notwithstanding the
foregoing, none of Dallas Land Associates Limited, a Texas limited
partnership, Dallas Properties V Limited, a Texas limited partnership, and
Dallas Properties VI Limited, a Texas limited partnership, or any of their
constituent equity owners as of June 18, 1998, shall be deemed to have
violated the Ownership Limit solely on account of ownership of Series Z
Preferred Shares.
<PAGE>
At any time after the issuance of the Series Z Preferred Shares, the Trust,
at its option and upon not less than 30 nor more than 60 days' written notice,
may redeem the Series Z Preferred Shares, in whole or in part, at any time or
from time to time, for cash at a redemption price of $25.00 per share, plus all
accrued and unpaid dividends thereon to the date fixed for redemption (except as
provided in Section 5(c) below), without interest. If less than all of the
outstanding Series Z Preferred Shares is to be redeemed, the Series Z Preferred
Shares to be redeemed shall be selected pro rata (as nearly as may be
practicable without creating fractional shares) or by any other equitable method
determined by the Trust.
B. Limitations on Redemption. Unless full cumulative dividends on all
Series Z Preferred Shares shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart
for payment for all past dividend periods and the then current dividend
period, no Series Z Preferred Shares shall be redeemed unless all
outstanding Series Z Preferred Shares are simultaneously redeemed, and the
Trust shall not purchase or otherwise directly or indirectly acquire any
Series Z Preferred Shares (except by exchange for shares of beneficial
interest of the Trust ranking junior to the Series Z Preferred Shares as to
dividends and upon liquidation); provided, however, that the foregoing
shall not prevent the purchase by the Trust of Excess Shares in order to
ensure that the Trust remains qualified as a REIT for federal income tax
purposes or the purchase or acquisition of Series Z Preferred Shares
pursuant to a purchase or exchange offer made on the same terms to holders
of all outstanding Series Z Preferred Shares.
C. Payment of Dividends in Connection with Redemption. Immediately
prior to any redemption of Series Z Preferred Shares, the Trust shall pay,
in cash, any accumulated and unpaid dividends through the redemption date,
unless a redemption date falls after a Dividend Record Date and prior to
the corresponding Dividend Payment Date, in which case each holder of
Series Z Preferred Shares at the close of business on such Dividend Record
Date shall be entitled to the dividend payable on such shares on the
corresponding Dividend Payment Date notwithstanding the redemption of such
shares before such Dividend Payment Date. Except as provided above, the
Trust will make no payment or allowance for unpaid dividends, whether or
not in arrears, on Series Z Preferred Shares which are redeemed.
D. Mandatory Redemption. All Series Z Preferred Shares that have not
been previously redeemed shall be subject to mandatory redemption on June
18, 2018. The Series Z Preferred Shares shall not be subject to any sinking
fund.
E. Procedures for Redemption.
a. Notice of redemption will be mailed by the Trust, postage
prepaid, not less than 30 nor more than 60 days prior to the
redemption date, addressed to the respective holders of record of
the Series Z Preferred Shares to be redeemed at their respective
addresses as they appear on the stock transfer records of the
Trust. No failure to give such notice or any defect thereto or in
the mailing thereof shall affect the validity of the proceedings
for the redemption of any shares of Series Z Preferred Shares
except as to the holder to whom notice was defective or not
given.
b. In addition to any information required by law or by the
applicable rules of any exchange upon which Series Z Preferred
Shares may be listed or admitted to trading, such notice shall
state: (A) the redemption date; (B) the redemption price; (C) the
number of Series Z Preferred Shares to be redeemed; (D) the place
or places where the Series Z Preferred Shares are to be
surrendered for payment of the redemption price; and (E) that
dividends on the shares to be redeemed will cease to accrue on
such redemption date. If less than all of the Series Z Preferred
Shares held by any holder are to be redeemed, the notice mailed
to such holder shall also specify the number of Series Z
Preferred Shares held by such holder to be redeemed.
<PAGE>
c. If notice of redemption of any Series Z Preferred Shares has been
given and if the funds necessary for such redemption have been
set aside by the Trust in trust for the benefit of the holders of
any Series Z Preferred Shares so called for redemption, then from
and after the redemption date dividends will cease to accrue on
such Series Z Preferred Shares, such Series Z Preferred Shares
shall no longer be deemed outstanding and all rights of the
holders of such shares will terminate, except the right to
receive the redemption price. Holders of Series Z Preferred
Shares to be redeemed shall surrender such Series Z Preferred
Shares at the place designated in such notice and, upon surrender
in accordance with said notice of the certificates for Series Z
Preferred Shares so redeemed (properly endorsed or assigned for
transfer, if the Trust shall so require and the notice shall so
state), such Series Z Preferred Shares shall be redeemed by the
Trust at the redemption price plus any accrued and unpaid
dividends payable upon such redemption. In case less than all the
Series Z Preferred Shares represented by any such certificate are
redeemed, a new certificate or certificates shall be issued
representing the unredeemed Series Z Preferred Shares without
cost to the holder thereof.
<PAGE>
d. The deposit of funds with a bank or trust corporation for the
purpose of redeeming Series Z Preferred Shares shall be
irrevocable except that:
(1) the Trust shall be entitled to receive from such bank or
trust corporation the interest or other earnings, if any,
earned on any money so deposited in trust, and the holders
of any shares redeemed shall have no claim to such interest
or other earnings; and
(2) any balance of monies so deposited by the Trust and
unclaimed by the holders of the Series Z Preferred Shares
entitled thereto at the expiration of two years from the
applicable redemption dates shall be repaid, together with
any interest or other earnings thereon, to the Trust, and
after any such repayment, the holders of the shares entitled
to the funds so repaid to the Trust shall look only to the
Trust for payment without interest or other earnings.
F. Excess Share Provisions. The Series Z Preferred Shares are subject
to the provisions of Article V of the Charter, including, without
limitation, the provision for the redemption of Excess Shares. In addition
to the redemption rights set forth in Article V of the Charter, Excess
Shares issued upon exchange of Series Z Preferred Shares pursuant to such
Article may be redeemed, in whole or in part, at any time when outstanding
Series Z Preferred Shares are being redeemed, for cash at a redemption
price of $25.00 per share, plus all accrued and unpaid dividends on the
Series Z Preferred Shares, which were exchanged for such Excess Shares,
through the date of such exchange, without interest. If the Trust elects to
redeem Excess Shares pursuant to the redemption right set forth in the
preceding sentence, such Excess Shares shall be redeemed in such proportion
and in accordance with such procedures as Series Z Preferred Shares are
being redeemed.
G. Status of Redeemed Shares. Any Series Z Preferred Shares that shall
at any time have been redeemed shall, after such redemption, have the
status of authorized but unissued Preferred Shares, without designation as
to series until such shares are thereafter designated as part of a
particular series by the Board of Trustees.
6. VOTING RIGHTS.
A. Holders of the Series Z Preferred Shares will not have any voting
rights, except as set forth below or as otherwise from time to time
required by law.
B. So long as any Series Z Preferred Shares remain outstanding, the
Trust shall not, without the affirmative vote of the holders of at least
two-thirds of the Series Z Preferred Shares outstanding at the time, given
in person or by proxy, either in writing or at a meeting (voting separately
as a class), amend, alter or repeal the provisions of the Charter, whether
by merger, consolidation or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of the
Series Z Preferred Shares or the holders thereof; provided, however, that
with respect to the occurrence of any Event, so long as the Series Z
Preferred Shares remain outstanding with the terms thereof materially
unchanged or, if the Trust is not the surviving entity in such transaction,
are exchanged for a security of the surviving entity with terms that are
materially the same as the Series Z Preferred Shares, the occurrence of any
such Event shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers of the holders of the
Series Z Preferred Shares and; provided, further, that (i) any increase in
the amount of the authorized Preferred Shares or the creation or issuance
of any other series of Preferred Shares, or any increase in the amount of
authorized shares of such series, whether or not such series ranks senior
to the Series Z Preferred Shares with respect to payment of dividends or
the distribution of assets upon liquidation, dissolution or winding up,
shall not be deemed to materially and adversely affect such rights,
<PAGE>
preferences, privileges or voting powers and (ii) any amendment to Article
V of the Charter relating to Excess Shares, the Ownership Limit or any
other matter described therein of any type or nature shall in no event be
deemed to materially and adversely affect such rights, preferences,
privileges or voting powers so long as after such amendment any single
holder may "beneficially own" (as defined in Article V prior to or after
such amendment) 9.8% of the outstanding Series Z Preferred Shares and 9.8%
of any other class or series of shares of beneficial interest without
violating the Ownership Limit.
C. The foregoing voting provisions will not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required to be effected, all outstanding Series Z Preferred Shares shall
have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect such
redemption.
7. CONVERSION.
The Series Z Preferred Shares are not convertible into or exchangeable
for any other property or securities of the Trust, except that the Series Z
Preferred Shares will automatically be exchanged by the Trust for Excess
Shares, in accordance with Article V of the Charter in the same manner that
Common Shares are exchanged for Excess Shares pursuant thereto, in order to
ensure that the Trust remains qualified as a REIT for federal income tax
purposes.
THIRD: These Articles Supplementary shall be effective at the time the
State Department of Assessments and Taxation of Maryland accepts these Articles
Supplementary for record.
<PAGE>
IN WITNESS WHEREOF, GABLES RESIDENTIAL TRUST has caused these presents to
be signed in its name and on its behalf by its Chairman and Chief Executive
Officer on June 18, 1998.
GABLES RESIDENTIAL TRUST
By: /s/ Marcus E. Bromley
-------------------------------------
Marcus E. Bromley
Trustee, Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Marvin R. Banks, Jr.
- -------------------------------
Marvin R. Banks, Jr.
Secretary
THE UNDERSIGNED, as Trustee, Chairman of the Board and Chief Executive
Officer of Gables Residential Trust, who executed on behalf of the Trust
the Articles Supplementary of which this Certificate is made a part, hereby
acknowledges in the name and on behalf of said Trust the foregoing Articles
Supplementary to be the act of said Trust by resolution adopted by a
majority of the Trust's trustees and hereby certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth
herein with respect to the authorization and approval thereof are true in
all material respects under the penalties of perjury.
/s/ Marcus E. Bromley (SEAL)
-----------------------------
Marcus E. Bromley
Trustee, Chairman of the Board and
Chief Executive Officer
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
GABLES REALTY LIMITED PARTNERSHIP
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF GABLES
REALTY LIMITED PARTNERSHIP ("Agreement"), dated as of June 18, 1998, is entered
into by and among Gables GP, Inc. ("GGPI"), a Texas corporation, as the General
Partner and the Persons whose names are set forth on Exhibit A as attached
hereto, as the Limited Partners, together with any other Persons who become
Partners in the Partnership as provided herein.
WHEREAS, the partnership was organized on October 15, 1993 by Arbor
Properties, Inc., as general partner and Marcus E. Bromley as organizational
limited partner;
WHEREAS, by amendment dated January 19, 1994, Arbor Properties, Inc.
withdrew from the Partnership and GGPI was admitted as a successor general
partner;
WHEREAS, by amendment dated January 26, 1994, the Limited Partners made
certain contributions to the capital of the Partnership;
WHEREAS, by amendment dated July 24, 1997, the General Partner, pursuant to
and in accordance with Section 4.2.A, caused the Partnership to issue additional
Partnership Interests (the "Series A Preferred Units") in connection with the
offering by Gables Trust of shares of its 8.30% Series A Cumulative Redeemable
Preferred Shares ("Gables Trust Series A Preferred Shares");
WHEREAS, the General Partner is, pursuant to and in accordance with Section
4.2.A, causing the Partnership to issue additional Partnership Interests (the
"Series Z Preferred Units") in connection with the issuance by Gables Trust of
shares of its 5.00% Series Z Cumulative Redeemable Preferred Shares ("Gables
Trust Series Z Preferred Shares");
NOW THEREFORE, in consideration of the mutual covenants herein contained,
and other valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto do hereby agree as follows:
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ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 4.2 hereof and who is shown as such on the
books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each Partnership taxable year (i) increased by any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5)
and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership taxable year.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Exhibit B hereof. Once an Adjusted Property is deemed
distributed by, and recontributed to, the Partnership for federal income tax
purposes upon a termination thereof pursuant to Section 708 of the Code, such
property shall thereafter constitute a Contributed Property until the Carrying
Value of such property is further adjusted pursuant to Exhibit B hereof.
"Affiliate" means, with respect to any Person, (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person, (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests, or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above.
"Agreed Value" means (i) in the case of any Contributed Property set forth
in Exhibit D and as of the time of its contribution to the Partnership, the
Agreed Value of such property as set forth in Exhibit D; (ii) in the case of any
Contributed Property not set forth in Exhibit D and as of the time of its
contribution to the Partnership, the 704(c) Value of such property, reduced by
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any liabilities either assumed by the Partnership upon such contribution or to
which such property is subject when contributed, and (iii) in the case of any
property distributed to a Partner by the Partnership, the Partnership's Carrying
Value of such property at the time such property is distributed, reduced by any
indebtedness either assumed by such Partner upon such distribution or to which
such property is subject at the time of distribution as determined under Section
752 of the Code and the Regulations thereunder.
"Agreement" means this First Amended and Restated Agreement of Limited
Partnership, as it may be amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss (as the case may be) for such
period (without regard to adjustments resulting from allocations
described in Sections 1.A through 1.E of Exhibit C);
(b) Depreciation and all other noncash charges deducted in determining Net
Income or Net Loss for such period;
(c) the amount of any reduction in the reserves of the Partnership
referred to in clause (ii) (f) below (including, without limitation,
reductions resulting because the General Partner determines such
amounts are no longer necessary);
(d) the excess of proceeds from the sale, exchange, disposition, or
refinancing of Partnership property for such period over the gain
recognized from such sale, exchange, disposition, or refinancing
during such period (excluding Terminating Capital Transactions); and
(e) all other cash received by the Partnership for such period that was
not included in determining Net Income or Net Loss for such period;
(ii) less the sum of:
(a) all principal debt payments made by the Partnership during such
period;
(b) capital expenditures made by the Partnership during such period;
(c) investments made by the Partnership during such period in any entity
(including loans made thereto) to the extent that such investments are
not otherwise described in clause (ii)(a) or (ii)(b);
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(d) all other expenditures and payments not deducted in determining Net
Income or Net Loss for such period;
(e) any amount included in determining Net Income or Net Loss for such
period that was not received by the Partnership during such period;
(f) the amount of any increase in reserves during such period which the
General Partner determines to be necessary or appropriate in its sole
and absolute discretion; and
(g) the amount of any working capital accounts and other cash or similar
balances which the General Partner determines to be necessary or
appropriate, in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
"Capital Contribution" means, with respect to any Partner, any cash, cash
equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1, 4.2, or 4.3 hereof.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Property charged to the Partners'
Capital Accounts following the contribution of or adjustment with respect to
such Property, and (ii) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of the
time of determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Exhibit B hereof, and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
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"Cash Amount" means an amount of cash per Partnership Unit equal to the
Value on the Valuation Date of the REIT Shares Amount.
"Certificate" means the Certificate of Limited Partnership relating to the
Partnership filed in the office of the Delaware Secretary of State, as amended
from time to time in accordance with the terms hereof and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"Consent" means the consent or approval of a proposed action by a Partner
given in accordance with Section 14.2 hereof.
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Act, but excluding cash, contributed or deemed
contributed to the Partnership (including deemed contributions to the
Partnership on termination and reconstitution thereof pursuant to Section 708 of
the Code). Once the Carrying Value of a Contributed Property is adjusted
pursuant to Exhibit B hereof, such property shall no longer constitute a
Contributed Property for purposes of Exhibit B hereof, but shall be deemed an
Adjusted Property for such purposes.
"Conversion Factor" means 1.0, provided that in the event that the Gables
Trust (i) declares or pays a dividend on its outstanding REIT Shares in REIT
Shares or makes a distribution to all holders of its outstanding REIT Share in
REIT Shares; (ii) subdivides its outstanding REIT Shares; or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of REIT Shares issued and outstanding on
the record date for such dividend, distribution, subdivision or combination
assuming for such purpose that such dividend, distribution, subdivision or
combination has occurred as of such time, and the denominator of which shall be
the actual number of REIT Shares (determined without the above assumption)
issued and outstanding on the record date for such dividend, distribution,
subdivision or combination. Any adjustment to the Conversion Factor shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
"Declaration of Trust" means the Declaration of Trust of Gables Residential
Trust (formerly Gables Properties Trust) filed in the State of Maryland on
October 13, 1993, as amended or restated from time to time.
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"Depreciation" means, for each taxable year an amount equal to the federal
income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Effective Date" means the date of closing of the initial public offering
of REIT Shares pursuant to that certain purchase agreement among the Gables
Trust, the General Partner and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Dean Witter Reynolds Inc. and The Robinson-Humphrey Company, Inc.,
as representatives of the underwriters.
"Gables Trust" means Gables Residential Trust, a Maryland real estate
investment trust.
"General Partner" means Gables GP, Inc., in its capacity as the general
partner of the Partnership, or its successors as general partner of the
Partnership.
"General Partner Interest" means a Partnership Interest held by the General
Partner that is a general partnership interest. A General Partner Interest may
be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such natural
Person's spouse and such natural Person's natural or adoptive parents,
descendants, nephews, nieces, brothers, and sisters.
"Incapacity" or "Incapacitated" means, (i) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating him incompetent to manage his Person or his estate; (ii) as to any
corporation which is a Partner, the filing of a certificate of dissolution, or
its equivalent, for the corporation or the revocation of its charter; (iii) as
to any partnership which is a Partner, the dissolution and commencement of
winding up of the partnership; (iv) as to any estate which is a Partner, the
distribution by the fiduciary of the estate's entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and
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nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner, (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors, (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above, (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties, (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within one
hundred twenty (120) days after the commencement thereof, (g) the appointment
without the Partner's consent or acquiescence of a trustee, receiver or
liquidator has not been vacated or stayed within ninety (90) days of such
appointment, or (h) an appointment referred to in clause (g) which has been
stayed is not vacated within ninety (90) days after the expiration of any such
stay.
"Indemnitee" means (i) any Person made a party to a proceeding by reason of
(A) his status as the General Partner, or the sole shareholder of the General
Partner (i.e., the Gables Trust), or a director or officer of the Partnership,
the General Partner or the Gables Trust, or (B) his or its liabilities, pursuant
to a loan guarantee or otherwise, for any indebtedness of the Partnership or any
Subsidiary of the Partnership (including, without limitation, any indebtedness
which the Partnership or any Subsidiary of the Partnership has assumed or taken
assets subject to), and (ii) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from
time to time (whether before or after the event giving rise to potential
liability), in its sole and absolute discretion.
"Limited Partner" means the Gables Trust and any other Person named as a
Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended
from time to time, or any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Limited Partner in the Partnership.
"Limited Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
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included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in the
form of Exhibit E to this Agreement.
"Organizational Limited Partner" means Marcus E. Bromley.
"Ownership Interest" means the stock and securities (including any evidence
of indebtedness) of the General Partner at any time owned or held by the Gables
Trust.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners collectively.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Partnership taxable year shall be
determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
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"Partnership" means the limited partnership formed under the Act and
pursuant to the Prior Agreement, as amended and restated pursuant to this
Agreement, and any successor thereto.
"Partnership Interest" means an ownership interest in the Partnership (i)
representing a Capital Contribution by either a Limited Partner or the General
Partner or (ii)issued in exchange for the provision of services to the
partnership, and includes, in either case, any and all benefits to which the
holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations Section
1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net
increase or decrease in a Partnership Minimum Gain, for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"Partnership Record Date" means the record date established by the General
Partner for the distribution of Available Cash pursuant to Section 5.1 hereof,
which record date shall be the same as the record date established by the Gables
Trust for a distribution to its shareholders of some or all of its portion of
such distribution.
"Partnership Unit" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of Partnership Units outstanding and the Percentage Interest in the
Partnership represented by such Units are set forth in Exhibit A attached
hereto, as such Exhibit may be amended from time to time. The ownership of
Partnership Units shall be evidenced by such form of certificate for units as
the General Partner adopts from time to time unless the General Partner
determines that the Partnership Units shall be uncertificated securities.
"Partnership Year" means the fiscal year of the Partnership, which shall be
the calendar year.
"Percentage Interest" means, as to a Partner, its interest in the
Partnership as determined by dividing the Partnership Units (other than Series A
Preferred Units and Series Z Preferred Units) owned by such Partner by the total
number of Partnership Units (other than Series A Preferred Units and Series Z
Preferred Units) then outstanding and as specified in Exhibit A attached hereto,
as such Exhibit may be amended from time to time.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Prior Agreement" means the Agreement of Limited Partnership of Gables
Realty Limited Partnership, dated as of October 15, 1993 between Arbor
Properties, Inc., as the sole general partner, and the Organizational Limited
Partner, as the sole limited partner, as amended on January 19, 1994, which
Prior Agreement is amended and restated in its entirety by this Agreement as of
the Effective Date.
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"Recapture Income" means any gain recognized by the Partnership upon the
disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6 hereof.
"Redemption Right" shall have the meaning set forth in Section 8.6 hereof.
"Regulations" means the Income Tax Regulations promulgated under the Code,
as such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the Code.
"REIT Share" shall mean a common share of beneficial interest, par value
$.01, in the Gables Trust.
"REIT Shares Amount" shall mean a number of REIT Shares equal to the
product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor, provided that in the event the
Gables Trust issues to all holders of REIT Shares rights, options, warrants or
convertible or exchangeable securities entitling the shareholders to subscribe
for or purchase REIT Shares, or any other securities or property (collectively,
the "rights"), then the REIT Shares Amount shall also include such rights that a
holder of that number of REIT Shares would be entitled to receive.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
Disparities.
"704(c) Value" of any Contributed Property means the value of such property
as set forth in Exhibit D or if no value is set forth in Exhibit D, the fair
market value of such property or other consideration at the time of contribution
as determined by the General Partner using such reasonable method of valuation
as it may adopt; provided, however, that the 704(c) Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Exhibit B hereof. Subject to Exhibit B hereof, the
General Partner shall, in its sole and absolute discretion, use such method as
it deems reasonable and appropriate to allocate the aggregate of the 704(c)
Values of Contributed Properties in a single or integrated transaction among the
separate properties on a basis proportional to their respective fair market
values.
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"Series A Preferred Units" means the Partnership Units issued to the Gables
Trust and the General Partner on July 24, 1997 in connection with the issuance
of 8.30% Series A Cumulative Redeemable Preferred Shares by the Gables Trust and
the contribution of the net proceeds therefrom to the Partnership, which
Partnership Units have the rights, preferences and privileges designated herein.
The number of Series A Preferred Units issued to the Gables Trust and the
General Partner is set forth on Exhibit A attached hereto.
"Series Z Preferred Units" means the Partnership Units issued to the Gables
Trust and the General Partner on June 18, 1998 in connection with the issuance
of 5.00% Series Z Cumulative Redeemable Preferred Shares by the Gables Trust and
the contribution of the net proceeds therefrom to the Partnership, which
Partnership Units have the rights, preferences and privileges designated herein.
The number of Series Z Preferred Units issued to the Gables Trust and the
General Partner is set forth on Exhibit A attached hereto.
"Specified Redemption Date" means the tenth (10th) Business Day after
receipt by the General Partner of a Notice of Redemption; provided that no
Specified Redemption Date shall occur before one (1) year from January 26, 1994,
provided further that if the Gables Trust combines its outstanding REIT Shares,
no Specified Redemption Date shall occur after the record date of such
combination of REIT Shares and prior to the effective date of such combination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
voting equity securities or (ii) the outstanding equity interests is owed,
directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4.
"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under Exhibit B hereof) as of such date,
over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to Exhibit B hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to Exhibit B
hereof) as of such date, over (ii) the fair market value of such property (as
determined under Exhibit B hereof) as of such date.
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"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a REIT Share, the average of the daily
market price for the ten (10) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be: (i) if the
REIT Shares are listed or admitted to trading on any securities exchange or the
NASDAQ-National Market System, the closing price, regular way, on such day, or
if no such sale takes place on such day, the average of the closing bid and
asked prices on such day; (ii) if the REIT Shares are not listed or admitted to
trading on any securities exchange or the NASDAQ-National Market System, the
last reported sale price on such day or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reliable quotation source designated by the General Partner; or (iii) if the
REIT Shares are not listed or admitted to trading on any securities exchange or
the NASDAQ-National Market System and no such last reported sale price or
closing bid and asked prices are available, the average of the reported high bid
and low asked prices on such day, as reported by a reliable quotation source
designated by the General Partner, or if there shall be no bid and asked prices
on such day, the average of the high bid and low asked prices, as so reported,
on the most recent day (not more than ten (10) days prior to the date in
question) for which prices have been so reported; provided that if there are no
bid and asked prices reported during the ten (10) days prior to the date in
question, the Value of the REIT Shares shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. In the
event the REIT Shares Amount includes rights that a holder of REIT Shares would
be entitled to receive, then the Value of such rights shall be determined by the
General Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate.
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ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization and Continuation
-----------------------------
The Partnership is a limited partnership organized by GGPI (as successor
general partner to Arbor Properties, Inc.) and the Organizational Limited
Partner pursuant to the provisions of the Act and upon the terms and conditions
set forth in the Prior Agreement. The Partners hereby continue the Partnership
and amend and restate the Prior Agreement in its entirety as of the Effective
Date. Immediately following the admission of one or more Limited Partners to the
Partnership on the Effective Date, the Organizational Limited Partner shall
withdraw from the Partnership and release and relinquish any and all rights,
interest, and claims he may have in and to the Partnership; provided, however,
that the Organizational Limited Partner shall be admitted as a Limited Partner
pursuant to the terms hereof, with all the rights and interests thereof. Except
as expressly provided herein to the contrary, the rights and obligations of the
Partners and the administration and termination of the Partnership shall be
governed by the Act. The Partnership Interest of each Partner shall be personal
property for all purposes.
Section 2.2 Name
----
The name of the Partnership shall be Gables Realty Limited Partnership. The
Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or
similar words or letters shall be included in the Partnership's name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The General Partner in its sole and absolute discretion may change
the name of the Partnership at any time and from time to time and shall notify
the Limited Partners of such change in the next regular communication to the
Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
---------------------------------------------
The address of the registered office of the Partnership in the State of
Delaware and the name and address of the registered agent for service of process
on the Partnership in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The
principal office of the Partnership shall be 2859 Paces Ferry Road, Overlook
III, Suite 1400, Atlanta, Georgia 30339, or such other place as the General
Partner may from time to time designate by notice to the Limited Partners. The
Partnership may maintain offices at such other place or places within or outside
the State of Delaware as the General Partner deems advisable.
<PAGE>
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Section 2.4 Power of Attorney
-----------------
A. Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatement thereof) that the
General Partner or the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in which the
limited Partners have limited liability) in the State of Delaware and
in all other jurisdictions in which the Partnership may or plans to
conduct business or own property; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement in accordance
with its terms; (c) all conveyances and other instruments or documents
that the General Partner or the Liquidator deems appropriate or
necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement, including,
without limitation, a certificate of cancellation; (d) all instruments
relating to the admission, withdrawal, removal or substitution of any
Partner pursuant to, or other events described in, Article 11, 12 or
13 hereof or the Capital Contribution of any Partner; and (e) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of Partnership
Interest; and
(2) execute, swear to, seal, acknowledge and file all ballots, consents,
approvals, waivers, certificates and other instruments appropriate or
necessary, in the sole and absolute discretion of the General Partner
or any Liquidator, to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other action which is made or
given by the Partners hereunder or is consistent with the terms of
this agreement or appropriate or necessary, in the sole discretion of
the General Partner or any Liquidator, to effectuate the terms or
intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
<PAGE>
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B. The foregoing power of attorney is hereby declared to be irrevocable and
a power coupled with an interest, in recognition of the fact that each of the
Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within fifteen (15) days after receipt of the
General Partner's or Liquidator's request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.
Section 2.5 Term
----
The term of the Partnership commenced on October 15, 1993, the date the
Certificate was filed in the office of the Secretary of State of Delaware in
accordance with the Act and shall continue until December 31, 2092, unless, the
Partnership is dissolved sooner pursuant to the provisions of Article 13 or as
otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
--------------------
The purpose and nature of the business to be conducted by the Partnership
is (i) to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act, provided, however, that such business
shall be limited to and conducted in such a manner as to permit the Gables Trust
at all times to be classified as a REIT, unless the Gables Trust ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Partnership, (ii) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing or to own interests in any entity
engaged in any of the foregoing, and (iii) to do anything necessary or
incidental to the foregoing. In connection with the foregoing, and without
limiting the Gables Trust's right, in its sole discretion, to cease qualifying
as a REIT, the Partners acknowledge the Gables Trust's current status as a REIT
inures to the benefit of all of the Partners and not solely the General Partner.
<PAGE>
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Section 3.2 Powers
------
The Partnership is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership, provided that the Partnership shall
not take, or refrain from taking, any action which, in the judgment of the
General Partner, in its sole and absolute discretion, (i) could adversely affect
the ability of the Gables Trust to continue to qualify as a REIT, (ii) could
subject the Gables Trust to any additional taxes under Section 857 or Section
4981 of the Code, or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the Gables Trust or the
General Partner or either of their securities, unless such action (or inaction)
shall have been specifically consented to by the General Partner in writing.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
-------------------------------------
At the time of the execution of this agreement, the Partners shall make
Capital Contributions set forth in Exhibit A to this Agreement. At the request
of the General Partner, certain Capital Contributions may be made by way of
transfers to Gables-Tennessee Properties, a Tennessee general partnership that
is 99% owned by the Partnership (the "Tennessee Partnership"). To the extent the
Partnership acquires any property by the merger of any other Person into the
Partnership, Persons who receive Partnership Interests in exchange for their
interests in the Person merging into the Partnership shall become Partners and
shall be deemed to have made Capital Contributions as provided in the applicable
merger agreement and as set forth in Exhibit A as amended to reflect such deemed
Capital Contributions. The Partners shall own Partnership Units in the amounts
set forth for such Partner in Exhibit A and shall have a Percentage Interest in
the Partnership as set forth Exhibit A, which Percentage Interest shall be
adjusted in Exhibit A from time to time by the General Partner to the extent
necessary to reflect accurately redemptions, Capital Contributions, the issuance
of additional Partnership Units (pursuant to any merger or otherwise), or
similar events having an effect on any Partner's Percentage Interest. The number
of Partnership Units held by the General Partner (equal to one percent (1%) of
all outstanding Partnership Units from time to time) shall be deemed to be the
General Partner Interest. Except as provided in Sections 4.2 and 10.5, the
Partners shall have no obligation to make any additional Capital Contributions
or loans to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests
---------------------------------------------
A. The General Partner is hereby authorized to cause the Partnership from
time to time to issue to the Partners (including the General Partner) or other
Persons additional Partnership Units or other Partnership Interests in one or
more classes, or one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other special
<PAGE>
Page-17
rights, powers and duties, including rights, powers and duties senior to Limited
Partner Interests, all as shall be determined by the General Partner in its sole
and absolute discretion subject to Delaware law, including, without limitation,
(i) the allocations of items of Partnership income, gain, loss, deduction and
credit to each such class or series of Partnership Interests; (ii) the right of
each such class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership; provided that no
such additional Partnership Units or other Partnership Interests shall be issued
to the Gables Trust or the General Partner unless either (a)(1) the additional
Partnership Interests are issued in connection with an issuance of REIT Shares
or other shares by the Gables Trust, which shares have designations, preferences
and other rights such that the economic interests attributable to such shares
are substantially similar to the designations, preferences and other rights of
the additional Partnership Interests issued to the Gables Trust or the General
Partner in accordance with this Section 4.2.A, and (2) either (x) the Gables
Trust shall make a Capital Contribution to the Partnership in an amount equal to
the proceeds raised in connection with such issuance or (y) the Gables Trust
shall transfer to the General Partner, by loan or contribution, an amount equal
to the proceeds raised in connection with the issuance of such shares of the
Gables Trust and, in turn, the General Partner shall make a Capital Contribution
to the Partnership in an amount equal to the amount transferred to it by the
Gables Trust or (z) through a combination of (x) and (y) above a Capital
Contribution equal to the proceeds raised in connection with the issuance of
such shares is made to the Partnership, or (b) the additional Partnership
Interests are issued to all Partners in proportion to their respective
Percentage Interests.
B. After the initial public offering of REIT Shares, the Gables Trust shall
not issue any additional REIT Shares (other than REIT Shares issued pursuant to
Section 8.6), or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase REIT Shares
(collectively "New Securities") other than to all holders of REIT Shares unless
(i) the General Partner shall cause the Partnership to issue to the Gables Trust
or to the General Partner Partnership Interests or rights, options, warrants or
convertible or exchangeable securities of the Partnership having designations,
preferences and other rights, all such that the economic interests are
substantially similar to those of the New Securities, and (ii) either (a) the
Gables Trust contributes to the Partnership the proceeds from the issuance of
such New Securities and from the exercise of rights contained in such New
Securities or (b) the Gables Trust transfers to the General Partner, by loan or
contribution, the proceeds from the issuance of such New Securities and from the
exercise of rights contained in such New Securities and the General Partner, in
turn, contributes the amount so transferred to it to the Partnership, or
(c) through a combination of (a) and (b) above a Capital Contribution equal to
the proceeds raised in connection with the issuance of such New Securities and
from the exercise of rights contained in such New Securities is made to the
Partnership. Without limiting the foregoing, the Gables Trust is expressly
authorized to issue New Securities for less than fair market value, and the
General Partner is expressly authorized to cause the Partnership to issue to the
General Partner corresponding Partnership Interests, so long as (x) the General
Partner concludes in good faith that such issuance is in the interests of the
General Partner and the Partnership (for example, and not by way of limitation,
the issuance of REIT Shares and corresponding Units pursuant to an employee
<PAGE>
Page-18
stock purchase plan providing for employee purchases of REIT Shares at a
discount from fair market value or employee stock options that have an exercise
price that is less than the fair market value of the REIT Shares, either at the
time of issuance or at the time of exercise), and (y) the Gables Trust
contributes all proceeds from such issuance and exercise to the Partnership or
transfers all proceeds from such issuance and exercise to the General Partner,
whether by loan or contribution, and the General Partner, in turn, contributes
the amount so transferred to it to the Partnership.
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares
---------------------------------------------------
In connection with the initial public offering of REIT Shares by the Gables
Trust and any other issuance of REIT Shares or New Securities pursuant to
Section 4.2, the Gables Trust shall contribute to the Partnership any proceeds
(or a portion thereof) raised in connection with such issuance or shall transfer
to the General Partner any proceeds (or a portion thereof) raised in connection
with such issuance, by loan or capital contribution, and the General Partner
shall contribute the amount so transferred to it to the Partnership; provided
that if the proceeds actually received by the Gables Trust or the General
Partner are less than the gross proceeds of such issuance as a result of any
underwriter's discount or other expenses paid or incurred in connection with
such issuance, then the Gables Trust and the General Partner shall be deemed to
have made a Capital Contribution to the Partnership in the amount equal to the
sum of the net proceeds of such issuance plus the amount of such underwriter's
discount and other expenses paid by the Gables Trust or the General Partner.
Section 4.4 No Preemptive Rights
--------------------
No Person shall have any preemptive, preferential or other similar right
with respect to (i) additional Capital Contributions or loans to the
Partnership; or (ii) issuance or sale of any Partnership Units or other
Partnership Interests.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
-------------------------------------------------
(a) The General Partner shall distribute at least quarterly an amount equal
to 100% of Available Cash generated by the Partnership during such quarter or
shorter period to the Partners who are Partners on the Partnership Record Date
with respect to such quarter or shorter period
(i) first, to the General Partner and the Gables Trust (in proportion to
the number of Series A Preferred Units owned by each) an amount that
in the aggregate equals the aggregate amount of the dividends declared
and payable with respect to the Gables Trust Series A Preferred Shares
for such quarter or shorter period; and
<PAGE>
Page-19
(ii) second, to the General Partner and the Gables Trust (in proportion to
the number of Series Z Preferred Units owned by each) an amount that
in the aggregate equals the aggregate amount of the dividends declared
and payable with respect to the Gables Trust Series Z Preferred Shares
for such quarter or shorter period; and
(iii)third, to the Partners in accordance with their respective Percentage
Interests on such Partnership Record Date;
PROVIDED THAT in no event may a Partner receive a distribution of
Available Cash with respect to a Partnership Unit if such Partner is
entitled to receive a distribution out of such Available Cash with
respect to a REIT Share for which such Partnership Unit has been
redeemed or exchanged, and further provided that no distributions
shall be made pursuant to clause (iii) above unless all cumulative
dividends with respect to the Gables Trust Series A Preferred Shares
and the Gables Trust Series Z Preferred Shares for all past dividend
periods and the then current dividend period have been or
contemporaneously are (x) declared and paid in full or (y) declared
and a sum sufficient for the full payment thereof is set apart for
such payment. The General Partner shall take such reasonable efforts,
as determined by it in its sole and absolute discretion and consistent
with the Gables Trust's qualification as a REIT, to distribute
Available Cash to the Limited Partners so as to preclude any such
distribution or portion thereof from being treated as part of a sale
of property to the Partnership by a Limited Partner under Section 707
of the Code or the Regulations thereunder; provided that the General
Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of any distribution to a
Limited Partner being so treated.
(b) Notwithstanding anything to the contrary above, the Partnership shall
cause to be distributed to the Gables Trust and the General Partner (in
proportion to the number of Series A Preferred Units owned by each) an amount
that in the aggregate is equal to the aggregate amount necessary to redeem any
Gables Trust Series A Preferred Shares which have been called for redemption by
the Gables Trust, at such time as is necessary to facilitate any such
redemption. Such distribution will cause a redemption of a like number of Series
A Preferred Units.
(c) Notwithstanding anything to the contrary above, the Partnership shall
cause to be distributed to the Gables Trust and the General Partner (in
proportion to the number of Series Z Preferred Units owned by each) an amount
equal to the aggregate amount necessary to redeem any Gables Trust Series Z
Preferred Shares which have been called for redemption by the Gables Trust, at
such time as is necessary to facilitate any such redemption. Such distribution
will cause a redemption of a like number of Series Z Preferred Units.
<PAGE>
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Section 5.2 Amounts Withheld
----------------
All amounts withheld pursuant to the Code or any provisions of any state or
local tax law and Section 10.5 hereof with respect to any allocation, payment or
distribution to the General Partner, the Limited Partners or Assignees shall be
treated as amounts distributed to the General Partner, Limited Partners, or
Assignees pursuant to Section 5.1 for all purposes under this Agreement.
Section 5.3 Distributions Upon Liquidation
------------------------------
Proceeds from a Terminating Capital Transaction and any other cash received
or reductions in reserves made after commencement of the liquidation of the
Partnership shall be distributed to the Partners in accordance with Section 13.2
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
----------------------------------------
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Subject to (iii) below, and after reduction for the allocations
described therein, Net Income shall be allocated
(i) first, to the Partners in the same ratio and reverse order as Net Loss
was allocated to such Partners pursuant to Section 6.1.B(ii), (iii),
(iv), (v), (vi) and (vii) for all fiscal years until the aggregate
amount of Net Losses previously allocated to the Partners pursuant to
such provisions of Section 6.1.B equal the aggregate amount of Net
Income allocated to such Partners pursuant to this clause (i) of
Section 6.1.A; and
(ii) thereafter, Net Income shall be allocated to the Partners in
accordance with their respective Percentage Interests.
(iii)Notwithstanding anything to the contrary in 6.1.A(i) and (ii) above,
items of gross income shall be allocated
(a) first to the General Partner and the Gables Trust, pro rata, in
proportion to the number of Series A Preferred Units owned by
each, until the aggregate amount of income allocated pursuant to
this clause (a) for all fiscal periods equals the aggregate
amount distributed to the General Partner and the Gables Trust
pursuant to clause (i) of Section 5.1(a) for all fiscal periods,
and
<PAGE>
Page-21
(b) second, to the General Partner and the Gables trust, pro rata, in
proportion to the number of Series Z Preferred Units owned by
each, until the aggregate amount of income allocated pursuant to
this clause (b) for all fiscal periods equals the aggregate
amount distributed to the General Partner and the Gables Trust
pursuant to clause (ii) of Section 5.1(a) for all fiscal periods.
B. After giving effect to the special allocations set forth in Section 1 of
Exhibit C attached hereto, Net Losses shall be allocated
(i) first, to the Partners in the same ratio and reverse order as Net
Income was allocated to such Partners pursuant to Section 6.1.A(ii)
for all fiscal years until the aggregate amount of Net Income
previously allocated to such Partners pursuant to Section 6.1.A(ii)
equals the aggregate amount of Net Loss allocated to such Partners
pursuant to this Section 6.1.B(i);
(ii) second, to the Partners, pro rata, in proportion to their Adjusted
Capital Account balance until their Adjusted Capital Account balance
has been reduced to zero, provided however, for purposes of this
Section 6.1.B(ii) each Partner's Adjusted Capital Account balance
shall not include the portion of such Capital Account attributable to
Capital Contributions made by such Partner, if any, with respect to
the Series A Preferred Units or the Series Z Preferred Units;
(iii)third, to the Partners who are holders of the Series Z Preferred
Units, pro rata, in proportion to the portion of their Adjusted
Capital Account balance attributable to the Series Z Preferred Units,
until the aggregate amount of Net Loss allocated to such Partners
pursuant to this Section 6.1.B(iii) has reduced such portion of their
Adjusted Capital Account balance to zero;
(iv) fourth, to the Partners who are holders of the Series A Preferred
Units, pro rata, in proportion to the portion of their Adjusted
Capital Account balance attributable to the Series A Preferred Units,
until the aggregate amount of Net Loss allocated to such Partners
pursuant to this Section 6.1.B(iv) has reduced such portion of their
Adjusted Capital Account balance to zero;
(v) fifth, to the General Partner until the General Partner's negative
Adjusted Capital Account balance is equal to the excess, if any, of
the aggregate recourse liabilities of the Partnership over the
aggregate amount of recourse Partnership debt with respect to which
any Limited Partner has agreed to reimburse the Partnership pursuant
to this Agreement or any binding written agreement in connection with
a contribution of property to the Partnership or otherwise (with
respect to each such Limited Partner, the "Reimbursement Amount" and
with respect to all such Limited Partners, the "Aggregate
Reimbursement Amount");
<PAGE>
Page-22
(vi) sixth, to the Limited Partners who have agreed to reimburse the
Partnership with respect to any amount of recourse debt referred to in
(v) above, in proportion to each such Limited Partner's Reimbursement
Amount until the aggregate amount allocated pursuant to this 6.1.B(vi)
is equal to the Aggregate Reimbursement Amount; and
(vii)thereafter, all Net Losses in excess of the limitations set forth in
this Section 6.1.B shall be allocated to the General Partner.
C. For purposes of Regulations Section 1.752-3(a), the Partners agree that
Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the
amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with their
respective interests in Partnership profits, as determined by the General
Partner in its reasonable discretion after taking into account all relevent
facts and circumstances.
D. Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall to the extent possible, after taking
into account other required allocations of gain pursuant to Exhibit C, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners have been allocated any deductions directly or indirectly
giving rise to the treatment of such gains as Recapture Income.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
----------
A. Except as otherwise expressly provided in this Agreement, all management
powers over the business and affairs the Partnership are and shall be
exclusively vested in the General Partner, and no Limited Partner shall have any
right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 7.3 hereof, shall have
full power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth in
Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of money
(including, without limitation, making prepayments on loans and
borrowing money to permit the Partnership to make distributions to its
Partners in such amounts as will permit the Gables Trust (so long as
the Gables Trust qualifies as a REIT) to avoid the payment of any
federal income tax (including, for this purpose, any excise tax
pursuant to Section 4981 of the Code) and to make distributions to its
<PAGE>
Page-23
Partners such that the Gables Trust can distribute to its shareholders
amounts sufficient to permit the Gables Trust to maintain REIT
status), the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidence of
indebtedness (including the securing of same by deed to secure debt,
mortgage, deed of trust or other lien or encumbrance on the
Partnership's assets) and the incurring of any obligations it deems
necessary for the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership (including
the exercise or grant of any conversion, option, privilege, or
subscription right or other right available in connection with any
assets at any time held by the Partnership) or the merger or other
combination of the Partnership with or into another entity (all of the
foregoing subject to any prior approval only to the extent required by
Section 7.3 hereof);
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of
this Agreement and on any terms it sees fit, including, without
limitation, the financing of the conduct of the operations of the
Gables Trust, the General Partner, the Partnership or any of the
Partnership's Subsidiaries, the lending of funds to other Persons
(including, without limitation, the Subsidiaries of the Partnership
and/or the Gables Trust) and the repayment of obligations of the
Partnership and its Subsidiaries and any other Person in which it has
an equity investment, and the making of capital contributions to its
Subsidiaries;
(5) the management, operation, leasing, landscaping, repair, alteration,
demolition or improvement of any real property or improvements owed by
the Partnership or any Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any contracts,
conveyances or other instruments that the General Partner considers
useful or necessary to the conduct of the Partnership's operations or
the implementation of the General Partner's powers under this
Agreement, including contracting with contractors, developers,
consultants, accountants, legal counsel, other professional advisors
and other agents and the payment of their expenses and compensation
out of the Partnership's assets;
<PAGE>
Page-24
(7) the distribution of Partnership cash or other Partnership assets in
accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and other assets of
the Partnership;
(9) the collection and receipt of revenues and income of the Partnership;
(10) the establishment of one or more divisions of the Partnership, the
selection and dismissal of employees of the Partnership, any division
of the Partnership, or the General Partner (including, without
limitation, employees having titles such as "president," "vice
president," "secretary" and "treasurer" of the Partnership, any
division of the Partnership, or the General Partner), and agents,
outside attorneys, accountants, consultants and contractors of the
General Partner or the Partnership or any division of the Partnership,
and the determination of their compensation and other terms of
employment or hiring;
(11) the maintenance of such insurance for the benefit of the Partnership
and the Partners as it deems necessary or appropriate;
(12) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it deems
desirable (including, without limitation, the acquisition of interests
in, and the contributions of property to, its Subsidiaries and any
other Person in which it has an equity investment from time to time);
(13) the control of any matters affecting the rights and obligations of the
Partnership, including the settlement, compromise, submission to
arbitration or any other form of dispute resolution, or abandonment
of, any claim, cause of action, liability, debt or damages, due or
owing to or from the Partnership, the commencement or defense of
suits, legal proceedings, administrative proceedings, arbitration or
other forms of dispute, resolution, and the representation of the
Partnership in all suits or legal proceedings, administrative
proceedings, arbitrations or other forms of dispute resolution, the
incurring of legal expense, and the indemnification of any Person
against liabilities and contingencies to the extent permitted by law;
(14) the undertaking of any action in connection with the Partnership's
direct or indirect investment in its Subsidiaries or any other Person
(including, without limitation, the contribution or loan of funds by
the Partnership to such Persons);
<PAGE>
Page-25
(15) the determination of the fair market value of any Partnership property
distributed in kind using such reasonable method of valuation as the
General Partner may adopt;
(16) the exercise, directly or indirectly, through any attorney-in-fact
acting under a general or limited power of attorney, of any right,
including the right to vote, appurtenant to any asset or investment
held by the Partnership;
(17) the exercise of any of the powers of the General Partner enumerated in
this Agreement on behalf of or in connection with any Subsidiary of
the Partnership or any other Person in which the Partnership has a
direct or indirect interest, or jointly with any such Subsidiary or
other Person;
(18) the exercise of any of the powers of the General Partner enumerated in
this Agreement on behalf of any Person in which the Partnership does
not have an interest pursuant to contractual or other arrangements
with such Person; and
(19) the making, execution and delivery of any and all deeds, leases,
notes, deeds to secure debt, mortgages, deeds of trust, security
agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or legal instruments or agreement in
writing necessary or appropriate in the judgment of the General
Partner for the accomplishment of any of the powers of the General
Partner enumerated in this Agreement.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the Partners, notwithstanding any other provision of this Agreement
(except as provided in Section 7.3), the Act or any applicable law, rule or
regulation, to the fullest extent permitted under the Act or other applicable
law. The execution, delivery or performance by the General Partner or the
Partnership of any agreement authorized or permitted under this Agreement shall
not constitute a breach by the General Partner of any duty that the General
Partner may owe the Partnership or the Limited Partners or any other Persons
under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after January 26, 1994, the General Partner may
cause the Partnership to obtain and maintain (i) casualty, liability and other
insurance on the properties of the Partnership and (ii) liability insurance for
the Indemnitees hereunder.
D. At all times from and after January 26, 1994, the General Partner may
cause the Partnership to establish and maintain at any and all times working
<PAGE>
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capital accounts and other cash or similar balances in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
E. In exercising its authority under this Agreement, the General Partner
may, but shall be under no obligation to, take into account the tax consequences
to any Partner of any action taken by it; provided that, if the General Partner
decides to refinance (directly or indirectly) any outstanding indebtedness of
the Partnership, the General Partner shall use reasonable efforts to structure
such refinancing in a manner that minimizes any adverse tax consequences
therefrom to the Limited Partners, and provided further that, in deciding
whether or not to dispose of any property that represents more than one percent
of the Partnership's total assets, the General Partner shall consider in good
faith the income tax consequences of such disposition for both the General
Partner and the Limited Partners. The General Partner and the Partnership shall
not have liability to a Limited Partner under any circumstances as a result of
an income tax liability incurred by such Limited Partner as a result of an
action (or inaction) by the General Partner pursuant to its authority under this
Agreement.
Section 7.2 Certificate of Limited Partnership
----------------------------------
The General Partner has previously filed the Certificate with the Secretary
of State of Delaware as required by the Act. The General Partner shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of Delaware and any
other state, or the District of Columbia, in which the Partnership may elect to
do business or own property. To the extent that such action is determined by the
General Partner to be reasonable and necessary or appropriate, the General
Partner shall file amendments to and restatements of the Certificate and do all
the things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the laws
of the State of Delaware and each other state, or the District of Columbia, in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 8.5.A(4) hereof, the General Partner shall not be required,
before or after filing, to deliver or mail a copy of the Certificate or any
amendment thereto to any Limited Partner.
Section 7.3 Restrictions on General Partner Authority
-----------------------------------------
A. The General Partner may not take any action in contravention of an
express prohibition or limitation of this Agreement without the written Consent
of Limited Partners holding 75% or more of the Percentage Interests of the
Limited Partners (including Limited Partner Interests held by the Gables Trust
and the General Partner) (or such other percentage of the Limited Partners as
may be specifically provided for under a provision of this Agreement).
<PAGE>
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B. Except as provided in Article 13 hereof, the General Partner may not
sell, exchange, transfer or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination with any other
Person) without the Consent of Limited Partners holding 75% or more of the
Percentage Interests of the Limited Partners (including Limited Partnership
Interest held by the General Partner).
Section 7.4 Reimbursement of the General Partner
------------------------------------
A. Except as provided in this Section 7.4 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions, payments,
and allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership.
B. The General Partner shall be reimbursed on a monthly basis, or such
other basis as the General Partner may determine in its sole and absolute
discretion, for all expenses that it and/or the Gables Trust incurs relating to
the ownership and operation of, or for the benefit of, the Partnership; provided
that the amount of any such reimbursement shall be reduced by any interest
earned by the General Partner with respect to bank accounts or other instruments
or accounts held by it on behalf of the Partnership as permitted in Section
7.5.A. The Limited Partners acknowledge that, for purposes of this Section
7.4.B, all expenses of the General Partner and the Gables Trust are deemed
incurred for the benefit of the Partnership. Such reimbursements shall be in
addition to any reimbursement to the General Partner and/or the Gables Trust as
a result of indemnification pursuant to Section 7.7 hereof.
C. As set forth in Section 4.3, the Gables Trust and the General Partner
shall be treated as having made a Capital Contribution in the amount of all
expenses that the Gables Trust and the General Partner incur relating to the
organization and/or reorganization of the Partnership and the General Partner,
the initial public offering of REIT Shares by the Gables Trust, and any other
issuance of additional Partnership Interests or REIT Shares pursuant to Section
4.2 hereof.
D. In the event that the General Partner or the Gables Trust shall elect to
purchase from the shareholders of the Gables Trust REIT Shares for the purpose
of delivering such REIT Shares to satisfy an obligation under any dividend
reinvestment program adopted by the Gables Trust, any employee stock purchase
plan adopted by the General Partner or the Gables Trust, or any similar
obligation or arrangement undertaken by the General Partner or the Gables Trust
in the future, the purchase price paid by the General Partner or the Gables
Trust for such REIT Shares and any other expenses incurred by the General
Partner or the Gables Trust in connection with such purchase shall be considered
expenses of the Partnership and shall be reimbursed to the General Partner or
the Gables Trust, as the case may be, subject to the condition that: (i) if such
REIT Shares subsequently are to be sold by the General Partner or the Gables
Trust, the General Partner shall pay to the Partnership any proceeds received by
the General Partner or the Gables Trust for such REIT Shares (provided that a
transfer of REIT Shares for Units pursuant to Section 8.6 would not be
considered a sale for such purposes); and (ii) if such REIT Shares are not
retransferred by the General Partner or the Gables Trust within 30 days after
the purchase thereof, the General Partner shall cause the Partnership to cancel
a number of Partnership Units held by the General Partner equal to the product
obtained by multiplying the Conversion Factor by the number of such REIT Shares.
<PAGE>
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Section 7.5 Outside Activities of the General Partner and the Gables Trust
--------------------------------------------------------------
A. The General Partner shall not directly or indirectly enter into or
conduct any business other than in connection with the ownership, acquisition
and disposition of Partnership Interests as a General Partner or Limited Partner
and the management of the business of the Partnership, and such activities as
are incidental thereto, and the Gables Trust shall not directly or indirectly
enter into or conduct any business other than in connection with the ownership
of the stock of the General Partner, the ownership, acquisition or disposition
of Partnership Interests as a Limited Partner, making loans to the General
Partner, and such activities as are incidental thereto. The assets of the
General Partner shall be limited to Partnership Interests and the assets of the
Gables Trust shall be limited to the stock and debt obligations of the General
Partner and Partnership Interests. The General Partner shall not hold any assets
other than Partnership Interests as a General Partner or Limited Partner, and
other than such bank accounts or similar instruments or accounts as it deems
necessary to carry out its responsibilities contemplated under this Agreement
and its organizational documents. The General Partner and any Affiliates of the
General Partner may acquire Limited Partner Interests and shall be entitled to
exercise all rights of a Limited Partner relating to such Limited Partner
Interests. Notwithstanding the above, the General Partner may own an equity
interest in, and participate thereby in the business of, any affiliate or
subsidiary of Gables Trust, including, without limitation, the Tennessee
Partnership.
B. Except as provided in Section 7.4.D, in the event the Gables Trust
(and/or the General Partner) exercises its rights to purchase REIT Shares, then
the General Partner shall cause the Partnership to purchase from the Gables
Trust that number of Partnership Units equal to the product obtained by
multiplying the number of REIT Shares to be purchased by the Gables Trust
(and/or the General Partner) times the Conversion Factor on the same terms and
for the same aggregate price that the Gables Trust (and/or the General Partner)
purchased such REIT Shares. The General Partner shall then distribute such funds
to the Gables Trust.
C. The General Partner shall not issue at any time any capital stock
(whether voting or non-voting or common or preferred) or any evidence of
indebtedness except to the Gables Trust.
Section 7.6 Contracts with Affiliates
-------------------------
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
<PAGE>
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B. Except as provided in Section 7.5.A, the Partnership may transfer assets
to joint ventures, other partnerships, corporations or other business entities
in which it is or thereby becomes a participant upon such terms and subject to
such conditions consistent with this Agreement and applicable law as the General
Partner, in its sole and absolute discretion, believes are advisable.
C. Except as expressly permitted by this Agreement, neither the General
Partner nor any of its Affiliates shall sell, transfer or convey any property
to, or purchase any property from, the Partnership, directly or indirectly,
except pursuant to transactions that are determined by the General Partner in
good faith to be fair and reasonable and no less favorable to the Partnership
than would be obtained from an unaffiliated third party.
D. The General Partner, in its sole and absolute discretion and without the
approval of the Limited Partners, may propose and adopt on behalf of the
Partnership employee benefit plans, stock option plans, and similar plans funded
by the Partnership for the benefit of employees of the General Partner, the
Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in
respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, or any of the Partnership's Subsidiaries.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a right of first opportunity arrangement and
other conflict avoidance agreements with various Affiliates of the Partnership
and the General Partner, on such terms as the General Partner, in its sole and
absolute discretion, believes are advisable.
<PAGE>
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Section 7.7 Indemnification
---------------
A. The Partnership shall indemnify each Indemnitee from and against any and
all losses, claims, damages, liabilities, joint or several, expenses (including,
without limitation, attorneys fees and other legal fees and expenses),
judgments, fines , settlements, and other amounts arising from any and all
claims, demands, actions, suits or proceedings, civil, criminal, administrative
or investigative, that relate to the operations of the Partnership, the General
Partner or the Gables Trust as set forth in this Agreement in which such
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, unless it is established that: (i) the act or omission of the
Indemnitee was material to the matter giving rise to the proceeding and either
was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or (ii) in the case of any criminal proceeding,
the Indemnitee had reasonable cause to believe that the act or omission was
unlawful. Without limitation, the foregoing indemnity shall extend to any
liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any
indebtedness of the Partnership or any Subsidiary of the Partnership (including
without limitation, any indebtedness which the Partnership or any Subsidiary of
the Partnership has assumed or taken subject to), and the General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter into one
or more indemnity agreements consistent with the provisions of this Section 7.7
in favor of any Indemnitee having or potentially having liability for any such
indebtedness. The termination of any proceeding by judgment, order or settlement
does not create a presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 7.7.A with respect to the subject
matter of such proceeding. The termination of any proceeding by conviction of an
Indemnitee or upon a plea of nolo contendere or its equivalent by an Indemnitee,
or an entry of an order of probation against an Indemnitee prior to judgment,
creates a rebuttable presumption that such Indemnitee acted in a manner contrary
to that specified in this Section 7.7.A. Any indemnification pursuant to this
Section 7.7 shall be made only out of the assets of the Partnership, and neither
the General Partner nor any Limited Partner shall have any obligation to
contribute to the capital of the Partnership or otherwise provide funds, to
enable the Partnership to fund its obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding may be paid or reimbursed by the Partnership in advance of the final
disposition of the proceeding upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7.A. has been met, and (ii) a written undertaking
by or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in addition to
any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity unless otherwise provided in a written agreement pursuant to which
such Indemnities is indemnified.
<PAGE>
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D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnitees and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of Section 7.7; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 7.7 as in effect
immediately prior to such amendment, modification, or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
Section 7.8 Liability of the General Partner
--------------------------------
A. Notwithstanding anything to the contrary set forth in this Agreement,
neither the General Partner nor the Gables Trust shall be liable for monetary
damages to the Partnership, any Partners or any Assignees for losses sustained
or liabilities incurred as a result of errors in judgment or of any act or
omission if the General Partner acted in good faith.
<PAGE>
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B. The Limited Partners expressly acknowledge that the General Partner is
acting on behalf of the Partnership, the Gables Trust, and the shareholders of
the Gables Trust collectively, that the General Partner is under no obligation
to consider the separate interests of the Limited Partners (including, without
limitation, the tax consequences to Limited Partners or Assignees) in deciding
whether to cause the Partnership to take (or decline to take) any actions, and
that neither the General Partner nor the Gables Trust shall be liable for
monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Limited Partners in connection with such decisions, provided that the
General Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth in
Section 7.1.A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. Neither the General Partner nor the
Gables Trust shall be responsible for any misconduct or negligence on the part
of any such agent appointed by the General Partner in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's liability to the Partnership and the
Limited Partners under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner
--------------------------------------------
A. The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder.
<PAGE>
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D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any decision of
the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Gables Trust to continue to
qualify as a REIT or (ii) to avoid the Gables Trust incurring any taxes under
Section 857 or Section 4981 of the Code, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.
Section 7.10 Title to Partnership Assets
---------------------------
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby declares
and warrants that any Partnership assets for which legal title is held in the
name of the General Partner or any nominee or Affiliate of the General Partner
shall be held by the General Partner for the use and benefit of the Partnership
in accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use its best efforts to cause beneficial and record title
to such assets to be vested in the Partnership as soon as reasonably
practicable. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which legal
title to such Partnership assets is held.
<PAGE>
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Section 7.11 Reliance by Third Parties
-------------------------
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent or approval of any other
Partner or Person to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
-----------------------
The Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement, including Section 10.5 hereof, or under
the Act.
Section 8.2 Management of Business
----------------------
No Limited Partner or Assignee (other than the General Partner, any of its
Affiliates or any officer, director, employee, partner, agent or trustee of the
General Partner, the Partnership or any of their Affiliates, in their capacity
as such) shall take part in the operation, management or control (within the
meaning of the Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
<PAGE>
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Section 8.3 Outside Activities of Limited Partners
--------------------------------------
Subject to any agreements entered into pursuant to Section 7.6.E hereof and
any other agreements entered into by a Limited Partner or its Affiliates with
the Partnership or a Subsidiary, any Limited Partner (other than the General
Partner and the Gables Trust) and any officer, director, employee, agent,
trustee, Affiliate or shareholder of any Limited Partner (other than the General
Partner and the Gables Trust) shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities that are in direct
competition with the Partnership or that are enhanced by the activities of the
Partnership. Neither the Partnership nor any Partners shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner or
Assignee. None of the Limited Partners (other than the General Partner and the
Gables Trust) nor any other Person shall have any rights by virtue of this
Agreement or the Partnership relationship established hereby in any business
ventures of any other Person (other than the General Partner to the extent
expressly provided herein) and such Person shall have no obligation pursuant to
this Agreement to offer any interest in any such business ventures to the
Partnership, any Limited Partner or any such other Person, even if such
opportunity is of a character which, if presented to the Partnership, any
Limited Partner or such other Person, could be taken by such Person.
Section 8.4 Return of Capital
-----------------
Except pursuant to the right of redemption set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein. Except to
the extent provided by Exhibit C hereof or as permitted by Section 4.2.B, or
otherwise expressly provided in this Agreement, no Limited Partner or Assignee
shall have priority over any other Limited Partner or Assignee either as to the
return of Capital Contributions or as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership
------------------------------------------------------
A. In addition to other rights provided by this Agreement or by the Act,
and except as limited by Section 8.5.C hereof, each Limited Partner shall have
the right, for a purpose reasonably related to such Limited Partner's interest
as a limited partner in the Partnership, upon written demand with a statement of
the purpose of such demand and at such Limited Partner's own expense (including
such copying and administrative charges as the General Partner may establish
from time to time):
(1) to obtain a copy of the most recent annual and quarterly reports filed
with the Securities and Exchange Commission by the Gables Trust
pursuant to the Securities Exchange Act of 1934;
<PAGE>
Page-36
(2) to obtain a copy of the Partnership's federal, state and local income
tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and all
amendments thereto, together with executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount of cash and a
description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner.
B. The Partnership shall notify each Limited Partner upon request of the
then current Conversion Factor.
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other information the disclosure of which
the General Partner in good faith believes is not in the best interests of the
Partnership or could damage the Partnership or is business or (ii) the
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.
<PAGE>
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Section 8.6 Redemption Right
----------------
A. Subject to Sections 8.6.B and 8.6.C, on or after the date one (1) year
after the closing of the initial public offering of REIT Shares by the Gables
Trust, each Limited Partner, other than the General Partner, shall have the
right (the "Redemption Right") to require the Partnership to redeem on a
Specified Redemption Date all or a portion of the Partnership Units held by such
Limited Partner at a redemption price equal to and in the form of the Cash
Amount to be paid by the Partnership. The Redemption Right shall be exercised
pursuant to a Notice of Redemption delivered to the Partnership (with a copy to
the General Partner) by the Limited Partner who is exercising the redemption
right (the "Redeeming Partner"); provided, however, that the Partnership shall
not be obligated to satisfy such Redemption Right if the Gables Trust and/or the
General Partner elects to purchase the Partnership Units subject to the Notice
of Redemption pursuant to Section 8.6.B. A Limited Partner may not exercise the
Redemption Right for less than one thousand (1,000) Partnership Units or, if
such Limited Partner holds less than one thousand (1,000) Partnership Units, all
of the Partnership Units held by such Partner. The Redeeming Partner shall have
no right, with respect to any Partnership Units so redeemed, to receive any
distributions paid on or after the Specified Redemption Date. The Assignee of
any Limited Partner may exercise the rights of such Limited Partner pursuant to
this Section 8.6, and such Limited Partner shall be deemed to have assigned such
rights to such Assignee and shall be bound by the exercise of such rights by
such Assignee. In connection with any exercise of such rights by such Assignee
on behalf of such Limited Partner, the Cash Amount shall be paid by the
Partnership directly to such Assignee and not to such Limited Partner.
B. Notwithstanding the provisions of Section 8.6.A, a Limited Partner that
exercises the Redemption Right shall be deemed to have offered to sell the
Partnership Units described in the Notice of Redemption to the General Partner
and the Gables Trust, and either of the General Partner or the Gables Trust (or
both) may, in its sole and absolute discretion, elect to purchase directly and
acquire such Partnership Units by paying to the Redeeming Partner either the
Cash Amount or the REIT Shares Amount, as elected by the General Partner or the
Gables Trust (in its sole and absolute discretion), on the Specified Redemption
Date, whereupon the General Partner or the Gables Trust shall acquire the
Partnership Units offered for redemption by the Redeeming Partner and shall be
treated for all purposes of this Agreement as the owner of such Partnership
Units. If the General Partner and/or the Gables Trust shall elect to exercise
its right to purchase Partnership Units under this Section 8.6.B with respect to
a Notice of Redemption, they shall so notify the Redeeming Partner within five
Business Days after the receipt by the General Partner of such Notice of
Redemption. Unless the General Partner and/or the Gables Trust (in their sole
and absolute discretion) shall exercise its right to purchase Partnership Units
from the Redeeming Partner pursuant to this Section 8.6.B, neither the General
Partner nor the Gables Trust shall have any obligation to the Redeeming Partner
or the Partnership with respect to the Redeeming Partner's exercise of the
Redemption Right. In the event the General Partner or the Gables Trust shall
exercise its right to purchase Partnership Units with respect to the exercise of
a Redemption Right in the manner described in the first sentence of this Section
8.6.B, the Partnership shall have no obligation to pay any amount to the
Redeeming Partner with respect to such Redeeming Partner's exercise of such
<PAGE>
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Redemption Right, and each of the Redeeming Partner, the Partnership, and the
General Partner or the Gables Trust, as the case may be, shall treat the
transaction between the General Partner or the Gables Trust, as the case may be,
and the Redeeming Partner for federal income tax purposes as a sale of the
Redeeming Partner's Partnership Units to the General Partner or the Gables
Trust, as the case may be. Each Redeeming Partner agrees to execute such
documents as the General Partner may reasonably require in connection with the
issuance of REIT Shares upon exercise of the Redemption Right.
C. Notwithstanding the provisions of Section 8.6.A and Section 8.6.B, a
Partner shall not be entitled to exercise the Redemption Right pursuant to
Section 8.6.A if the delivery of REIT Shares to such Partner on the Specified
Redemption Date by the General Partner or the Gables Trust pursuant to Section
8.6.B (regardless of whether or not the General Partner or the Gables Trust
would in fact exercise its rights under Section 8.6.B) would be prohibited under
the Declaration of Trust or would violate any federal or state securities laws.
D. In connection with a redemption by Gables Trust of any or all of the
Gables Trust Series A Preferred Shares, the General Partner shall have the right
to cause the Partnership to redeem all or a portion of the Series A Preferred
Units that the Gables Trust and/or the General Partner holds, and such
redemption proceeds shall be distributed to the Gables Trust and/or the General
Partner, as applicable, pursuant to the provisions of Section 5.1(b).
E. In connection with a redemption by Gables Trust of any or all of the
Gables Trust Series Z Preferred Shares, the General Partner shall have the right
to cause the Partnership to redeem all or a portion of the Series Z Preferred
Units that the Gables Trust and/or the General Partner holds, and such
redemption proceeds shall be distributed to the Gables Trust and/or the General
Partner, as applicable, pursuant to the provisions of Section 5.1(c).
<PAGE>
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ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
----------------------
The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business, including, without limitation, all
books and records necessary to provide to the Limited Partners any information,
lists and copies of documents required to be provided pursuant to Section 9.3
hereof. Any records maintained by or on behalf of the Partnership in the regular
course of its business may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, micrographics or any other information storage
device, provided that the records so maintained are convertible into clearly
legible written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial and tax reporting purposes, on an
accrual basis in accordance with generally accepted accounting principles, or
such other basis as the General Partner determines to be necessary or
appropriate.
Section 9.2 Fiscal Year
-----------
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
-------
A. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each Partnership Year, the General Partner shall
cause to be mailed to each Limited Partner as of the close of the Partnership
Year, an annual report containing financial statements of the Partnership, or of
the General Partner or the Gables Trust if such statements are prepared solely
on a consolidated basis with the General Partner or the Gables Trust, for such
Partnership Year, presented in accordance with generally accepted accounting
principles, such statements to be audited by a nationally recognized firm of
independent public accountants selected by the General Partner.
B. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each calendar quarter (except the last calendar
quarter of each year), the General Partner shall cause to be mailed to each
Limited Partner as of the last day of the calendar quarter, a report containing
unaudited financial statements of the Partnership, or of the General Partner or
the Gables Trust, if such statements are prepared solely on a consolidated basis
with the General Partner or the Gables Trust, and such other information as may
be required by applicable law or regulation, or as the General Partner
determines to be appropriate.
<PAGE>
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ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
--------------------------
The General Partner shall arrange for the preparation and timely filing of
all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use all reasonable efforts to furnish, within ninety (90) days of the close of
each taxable year, the tax information reasonably required by Limited Partners
for federal and state income tax reporting purposes.
Section 10.2 Tax Elections
-------------
Except as otherwise provided herein, the General Partner shall, in its sole
and absolute discretion, determine whether to make any available election
pursuant to the Code. The General Partner shall have the right to seek to revoke
any such election (including, without limitation, the election under Section 754
of the Code) upon the General Partner's determination in its sole and absolute
discretion that such revocation is in the best interests of the Partners.
Section 10.3 Tax Matters Partner
-------------------
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address, taxpayer identification number, and
profit interest of each of the Limited Partners and the Assignees; provided,
however, that such information is provided to the Partnership by the Limited
Partners and the Assignees.
B. The tax matters partner is authorized, but not required.
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner for
income tax purposes (such administrative proceedings being referred to
as a "tax audit" and such judicial proceedings being referred to as
"judicial review"), and in the settlement agreement the tax matters
partner may expressly state that such agreement shall bind all
Partners, except that such settlement agreement shall not bind any
Partner (i) who (within the time prescribed pursuant to the Code and
Regulations) files a statement with the IRS providing that the tax
matters partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner or (ii) who is a
"notice partner" (as defined in Section 6231(a)(8) of the Code) or a
member of a "notice group" (as defined in Section 6223(b)(2) of the
Code);
<PAGE>
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(2) in the event that a notice of a final administrative adjustment at the
Partnership level of any item required to be taken into account by a
Partner for tax purposes (a "final adjustment") is mailed to the tax
matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court
or the filing of a complaint for refund with the United States Claims
Court or the District Court of the United States for the district in
which the Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner for judicial
review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS and,
if any part of such request is not allowed by the IRS, to file an
appropriate pleading (petition or complaint) for judicial review with
respect to such request;
(5) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be
taken account by a Partner for tax purposes, or an item affected by
such item; and
(6) to take any other action on behalf of the Partners or the Partnership
in connection with any tax audit or judicial review proceeding to the
extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 of this Agreement shall be fully applicable to
the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its services.
All third party costs and expenses incurred by the tax matters partner in
performing its duties as such (including legal and accounting fees and expenses)
shall be borne by the Partnership. Nothing herein shall be construed to restrict
the Partnership from engaging an accounting firm to assist the tax matters
partner in discharging its duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
<PAGE>
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Section 10.4 Organizational Expenses
-----------------------
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a sixty (60) month period as provided in
Section 709 of the Code.
Section 10.5 Withholding
-----------
Each Limited Partner hereby authorizes the Partnership to withhold from or
pay on behalf of or with respect to such Limited Partner any amount of federal,
state, local, or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited Partner
or (ii) the General Partner determines, in its sole and absolute discretion,
that such payment may be satisfied out of the available funds of the Partnership
which would, but for such payment, be distributed to the Limited Partner. Any
amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated
as having been distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest in
such Limited Partner's Partnership Interest to secure such Limited Partner's
obligation to pay to the Partnership any amounts required to be paid pursuant to
this Section 10.5. In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this Section 10.5 when due, the General
Partner may, in its sole and absolute discretion, elect to make the payment to
the Partnership on behalf of such defaulting Limited Partner, and in such event
shall be deemed to have loaned such amount to such defaulting Limited Partner
and shall succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner. Without limitation, in such event the General
Partner shall have the right to receive distributions that would otherwise be
distributable to such defaulting Limited Partner until such time as such loan,
together with all interest thereon, has been paid in full, and any such
distributions so received by the General Partner shall be treated as having been
distributed to the defaulting Limited Partner and immediately paid by the
defaulting Limited Partner to the General Partner in repayment of such loan. Any
amounts payable by a Limited Partner hereunder shall bear interest at the lesser
of (A) the base rate on corporate loans at large United States money center
commercial banks, as published from time to time in the Wall Street Journal,
plus four (4) percentage points, or (B) the maximum lawful rate of interest on
such obligation, such interest to accrue from the date such amount is due (i.e.,
fifteen (15) days after demand) until such amount is paid in full. Each Limited
Partner shall take such actions as the Partnership or the General Partner shall
request in order to perfect or enforce the security interest created hereunder.
<PAGE>
Page-43
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
--------
A. The term "transfer," when used in this Article 11 with respect to a
Partnership Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner Interest to
another Person or by which a Limited Partner purports to assign all or any part
of its Limited Partner Interest to another Person, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise. The term "transfer" when used in this
Article 11 does not include any redemption of Partnership Interests by the
Partnership from a Limited Partner or any acquisition of Partnership Units from
a Limited Partner by the General Partner or the Gables Trust pursuant to Section
8.6.
B. No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void.
Section 11.2 Transfer of General Partner's Partnership Interest or the Gables
-------------------------------------------------------------------
Trust's Interest in the General Partner
---------------------------------------
A. The General Partner may not transfer any of its General Partner Interest
or Limited Partnership Interests or withdraw as General Partner except as
provided in Section 11.2.B or in connection with a transaction described in
Section 11.2.C. The Gables Trust shall not transfer any of its Limited Partner
Interest or Ownership Interest except in connection with a transaction described
in Section 11.2.B or 11.2.C.
B. The General Partner and the Gables Trust may transfer Limited Partner
Interests held by them either to the Partnership in accordance with Section
7.5.B hereof or to a purported holder of REIT Shares in accordance with the
provisions of Article V of the Declaration of Trust.
C. Except as otherwise provided in Section 11.2.D., neither the General
Partner nor the Gables Trust shall engage in any merger, consolidation or other
combination with or into another Person or sale of all or substantially all of
its assets, or effect any reclassification, or recapitalization or change of
outstanding REIT Shares (other than a change in par value, or from par value to
no par value, or as a result of a subdivision or combination as described in the
definition of "Conversion Factor") ("Transaction"), unless (i) the Transaction
also includes a merger of the Partnership or sale of substantially all of the
assets of the Partnership which has been approved by the requisite Consent of
the Partners pursuant to Section 7.3 and as a result of which all Limited
Partners will receive for each Partnership Unit (other than Series A Preferred
Units and Series Z Preferred Units, which will be treated in a manner intended
to protect the economic rights of holders of the Gables Trust Series A Preferred
<PAGE>
Page-44
Shares and Gables Trust Series Z Preferred Shares, respectively) an amount of
cash, securities, or other property equal to the product of the Conversion
Factor and the greatest amount of cash, securities or other property paid to a
holder of one REIT Share in consideration of one REIT Share at any time during
the period from and after the date on which the Transaction is consummated,
provided that if, in connection with the Transaction, a purchase, tender or
exchange offer shall have been made to and accepted by the holders of more than
fifty percent (50%) of the outstanding REIT Shares, each holder of Partnership
Units shall receive the greatest amount of cash, securities, or other property
which such holder would have received had it exercised the Redemption Right and
received REIT Shares in exchange for its Partnership Units immediately prior to
the expiration of such purchase, tender or exchange offer and had thereupon
accepted such purchase, tender or exchange offer, and provided further that the
foregoing amounts required to be received by holders of Partnership Units may be
reduced by such amount as is necessary to account for the fact that the General
Partner holds an interest in the Tennessee Partnership; and (ii) no more than
forty-nine percent (49%) of the equity securities of the acquiring Person in
such transaction shall be owned, after consummation of such Transaction, by the
General Partner or Persons who are Affiliates of the Partnership or the General
Partner immediately prior to the date on which the Transaction is consummated.
D. Notwithstanding Section 11.2.C, either the General Partner or the Gables
Trust may merge with another entity if immediately after such merger
substantially all of the assets of the surviving entity, other than Partnership
Units held by the General Partner (whether such Partnership Units constitute the
General Partnership Interest or a Limited Partnership Interest) or by the Gables
Trust, are contributed to the Partnership as a Capital Contribution in exchange
for Partnership Units with a fair market value, as reasonably determined by the
General Partner, equal to the 704(c) Value of the assets so contributed.
Section 11.3 Limited Partners' Rights to Transfer
------------------------------------
A. Subject to the provisions of Sections 11.3.C, 11.3.D, 11.3.E, and 11.4,
a Limited Partner may transfer, with or without the consent of the General
Partner, all or any portion of its Partnership Interest, or any of such Limited
Partner's economic rights as a Limited Partner.
B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all the rights of a Limited Partner, but not
more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited Partner of
its Partnership Units if, in the opinion of legal counsel to the Partnership,
such transfer would require filing of a registration statement under the
Securities Act of 1933 or would otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Unit.
<PAGE>
Page-45
D. No transfer by a Limited Partner of its Partnership Units may be made to
any Person if (i) in the opinion of legal counsel for the Partnership, it would
result in the Partnership being treated as an association taxable as a
corporation, or (ii) such transfer is effectuated through an "established
securities market" or a "secondary market (or the substantial equivalent
thereof)" with the meaning of Section 7704 of the Code.
E. No transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, without the consent of the General Partner,
in its sole and absolute discretion, provided that as a condition to such
consent the lender will be required to enter into an arrangement with the
Partnership and the General Partner to exchange or redeem for the Cash Amount
any Partnership Units in which a security interest is held simultaneously with
the time at which such lender would be deemed to be a partner in the Partnership
for purposes of allocating liabilities to such lender under Section 752 of the
Code.
Section 11.4 Substituted Limited Partners
----------------------------
A. No Limited Partner shall have the right to substitute a transferee as a
Limited Partner in his place. The General Partner shall, however, have the right
to consent to the admission of a transferee of the interest of a Limited Partner
pursuant to this Section 11.4 as a Substituted Limited Partner, which consent
may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
C. Upon the admission of a Substituted Limited Partner, the General Partner
shall amend Exhibit A to reflect the name, address, number of Partnership Units,
and Percentage Interest of such Substituted Limited Partner and to eliminate or
adjust, if necessary, the name, address and interest of the predecessor of such
Substituted Limited Partner.
<PAGE>
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Section 11.5 Assignees
---------
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 as a
Substituted Limited Partner, as described in Section 11.4, such transferee shall
be considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses,
Recapture Income, and any other items, gain, loss deduction and credit of the
Partnership attributable to the Partnership Units assigned to such transferee,
but shall not be deemed to be a holder of Partnership Units for any other
purpose under this Agreement, and shall not be entitled to vote such Partnership
Units in any matter presented to the Limited Partners for a vote (such
Partnership Units being deemed to have been voted on such matter in the same
proportion as all other Partnership Units held by Limited Partners are voted).
In the event any such transferee desires to make a further assignment of any
such Partnership Units, such transferee shall be subject to all the provisions
of this Article 11 to the same extent and in the same manner as any Limited
Partner desiring to make an assignment of Partnership Units.
Section 11.6 General Provisions
------------------
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of its Partnership Units in a
transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such Partnership Units as
Substitute Limited Partners. Similarly, any Limited Partner who shall transfer
all of its Partnership Units pursuant to a redemption of all of its Partnership
Units under Section 8.6 shall cease to be a Limited Partner.
C. Transfers pursuant to this Article 11 may only be made on the first day
of a fiscal quarter of the Partnership, unless the General Partner otherwise
agrees.
D. If any Partnership Interest is transferred or assigned during any
quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article 11 or redeemed or transferred pursuant to Section
8.6, or any day other than the first day of a Partnership Year, then Net Income,
Net Losses, each item thereof and all other items attributable to such interest
for such Partnership Year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the Partnerships year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for purposes of
making such allocations, each of such items for the calendar month in which the
transfer or assignment occurs shall be allocated to the transferee Partner, and
none of such items for the calendar month in which a redemption occurs shall be
allocated to the Redeeming Partner. All distributions of Available Cash
attributable to such Partnership Unit with respect to which the Partnership
Record Date is before the date of such transfer, assignment, or redemption shall
be made to the transferor Partner or the Redeeming Partner, as the case may be,
and in the case of a transfer or assignment other than a redemption, all
distributions of Available Cash thereafter attributable to such Partnership Unit
shall be made to the transferee Partner.
<PAGE>
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ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
--------------------------------------
A successor to all of the General Partner Interest pursuant to Section 11.2
hereof who is proposed to be admitted as a successor General Partner shall be
admitted to the Partnership as the General Partner, effective upon such
transfer. Any such transferee shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership year
shall be allocated between the transferring General Partner and such successor
as provided in Section 11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners
----------------------------------------
A. After the admission to the Partnership of the initial Limited Partners
on January 26, 1994, a Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof and (ii) such
other documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no Person
shall be admitted as an Additional Limited Partner without the consent of the
General Partner, which consent may be given or withheld in the General Partner's
sole and absolute discretion. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each item thereof and all other items allocable among Partners and Assignees for
such Partnership Year shall be allocated among such Additional Limited Partner
and all other Partners and Assignees by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for purposes of
making such allocations, each of such item for the calendar month in which an
<PAGE>
Page-48
admission of any Additional Limited Partner occurs shall be allocated among all
the Partners and Assigns including such Additional Limited Partner. All
distributions of Available Cash with respect to which the Partnership Record
Date is before the date of such admission shall be made solely to Partners and
Assignees other than the Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all of the Partners and Assignees
including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership
-------------------------------------------------------------
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment of Exhibit A) and, if
required by law, shall prepare and file an amendment to the Certificate and may
for this purpose exercise the power of attorney granted pursuant to Section 2.4
hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
-----------
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, upon the first to occur of any of the following
("Liquidating Events"):
A. the expiration of its terms as provided in Section 2.5 hereof.
B. an event of withdrawal of the General Partner, as defined in the Act
(other than an event of bankruptcy), unless, within ninety (90) days after such
event of withdrawal a majority in interest of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal, of a successor General Partner;
C. from and after January 26, 1994 through December 31, 2053, an election
to dissolve the Partnership made by the General Partner with the Consent of
Partners holding 75% or more of the Percentage Interests of the Limited Partners
(including Limited Partner Interests held by the General Partner and the Gables
Trust);
D. on or after January 1, 2054 an election to dissolve the Partnership made
by the General Partner, in its sole and absolute discretion;
<PAGE>
Page-49
E. entry of a decree of judicial dissolution of the Partnership pursuant to
the provisions of the Act;
F. the sale of all or substantially all of the assets and properties of the
Partnership; or
G. a final and non-appealable judgment is entered by a court of competent
jurisdiction ruling that the General Partner is bankrupt or insolvent, or a
final and non-appealable order for relief is entered by a court with appropriate
jurisdiction against the General Partner, in each case under any federal or
state bankruptcy or insolvency laws as now or hereafter in effect, unless prior
to the entry of such order or judgment all of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of a date prior to the date of such order or judgment, of a
substitute General Partner.
Section 13.2 Winding Up
----------
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner or, in the event there is no remaining General Partner, any
Person elected by a majority in interest of the Limited Partners (the General
Partner or such other Person being referred to herein as the "Liquidator"),
shall be responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's liabilities and
property and the Partnership property shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds therefrom
(which may, to the extent determined by the General Partner, include shares of
stock in the General Partner) shall be applied and distributed in the following
order:
(1) First, to the payment and discharge of all of the Partnership's debts
and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership's debts
and liabilities to the General Partner and the Gables Trust;
(3) Third, to the payment and discharge of all of the Partnership's debts
and liabilities to the other Partners;
(4) Fourth, to the Partners holding Series A Preferred Units, pro rata, in
the ratio in which they hold such Units in an amount equal to the
liquidation preference with respect to the Gables Trust Series A
Preferred Shares plus any accrued but unpaid dividends with respect to
such shares;
<PAGE>
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(5) Fifth, to the Partners holding Series Z Preferred Units, pro rata, in
the ratio in which they hold such Units in an amount equal to the
liquidation preference with respect to the Gables Trust Series Z
Preferred Shares plus any accrued but unpaid dividends with respect to
such shares; and
(6) The balance, if any, to the General Partner and Limited Partners in
accordance with their Capital Accounts, after giving effect to all
contributions, distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof which require
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or all of the
Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating
Partnership assets, collecting amounts owed to the Partnership, and
paying any contingent or unforeseen liabilities or obligations of the
Partnership or the General Partner arising out of or in connection
with the Partnership. The assets of any such trust shall be
distributed to the General Partner and Limited Partners from time to
time, in the reasonable discretion of the Liquidator, in the same
proportions as the amount distributed to such trust by the Partnership
would otherwise have been distributed to the General Partner and
Limited Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed
to the General Partner and Limited Partners in the manner and order of
priority set forth in Section 13.2.A as soon as practicable.
<PAGE>
Page-51
Section 13.3 Compliance with Timing Requirements of Regulations
--------------------------------------------------
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If the General Partner has a deficit balance in his Capital Account (after
giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), such
Partner shall contribute to the capital of the Partnership the amount necessary
to restore such deficit balance to zero in compliance with Treasury Regulations
Section 1.704-1(b)(2)(ii)(b)(3). If any Limited Partner enters into an agreement
with the General Partner to contribute to the capital of the Partnership all or
a portion of any deficit balance in its Capital Account at such time as its
interest in the Partnership is "liquidated" within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g) or otherwise, such agreement shall be incorporated
herein for all purposes of this Agreement.
Section 13.4 Deemed Distribution and Recontribution
--------------------------------------
Notwithstanding any other provision of this Article 13, in the event the
Partnership is considered liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, for federal income tax purposes and for purposes of maintaining Capital
Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed to have
distributed the property in kind to the General Partner and Limited Partners,
who shall be deemed to have assumed and taken such property subject to all
Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the General Partner and Limited Partners shall
be deemed to have recontributed the Partnership property in kind to the
Partnership, which shall be deemed to have assumed and taken such property
subject to all such liabilities.
Section 13.5 Rights of Limited Partners
--------------------------
Except as otherwise provided in this Agreement, each Limited Partner shall
look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or allocations.
<PAGE>
Page-52
Section 13.6 Notice of Dissolution
---------------------
In the event a Liquidating Event occurs or an event occurs that would, but
for the provisions of an election or objection by one or more Partners pursuant
to Section 13.1, result in a dissolution of the Partnership, the General Partner
shall, within thirty (30) days thereafter, provide written notice thereof to
each of the Partners.
Section 13.7 Termination of Partnership and Cancellation of Certificate of
------------------------------------------------------------------
Limited Partnership
-------------------
Upon the completion of the liquidation of the Partnership cash and property
as provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
Section 13.8 Reasonable Time for Winding-Up
------------------------------
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 13.9 Waiver of Partition
-------------------
Each Partner hereby waives any right to partition of the Partnership
property.
<PAGE>
Page-53
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
----------
A. Amendments to this Agreement may be proposed by the General Partner or
by any Limited Partners holding twenty percent (20%) or more of the Partnership
Interests (not including any interest on account of the Series A Preferred Units
or the Series Z Preferred Units). Following such proposal, the General Partner
shall submit any proposed amendment to the Limited Partners. The General Partner
shall seek the written vote of the Partners on the proposed amendment or shall
call a meeting to vote thereon and to transact any other business that it may
deem appropriate. For purposes of obtaining a written vote, the General Partner
may require a response within a reasonable specified time, but not less than
fifteen (15) days, and failure to respond in such time period shall constitute a
vote which is consistent with the General Partner's recommendation with respect
to the proposal. Except as provided in Section 7.3.A, 7.3.B, 13.1.C, 14.1.B,
14.1.C or 14.1.D, a proposed amendment shall be adopted and be effective as an
amendment hereto if it is approved by the General Partner and it receives the
Consent of Partners holding a majority of the Percentage Interests of the
Limited Partners (including Limited Partner Interests held by the General
Partner and the Gables Trust).
B. Notwithstanding Section 14.1.A, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any
right or power granted to the General Partner or any Affiliate of the
General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or withdrawal of
Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and preferences
of the holders of any additional Partnership Interests issued pursuant
to Section 4.2.A hereof;
(4) to reflect a change that is of an inconsequential nature and does not
adversely affect the Limited Partners in any material respect, or to
cure any ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other provisions, or make
other changes with respect to matters arising under this Agreement
that will not be inconsistent with law or with the provisions of this
Agreement; and
<PAGE>
Page-54
(5) to satisfy any requirements, conditions, or guidelines contained in
any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B hereof, this Agreement shall
not be amended without the Consent of each Partner adversely affected if such
amendment would (i) convert a Limited Partner's interest in the Partnership into
a general partner interest, (ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner, (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or Article 13, or the
allocations specified in Article 6 (except as permitted pursuant to Section 4.2
and Section 14.1.B(3) hereof), (iv) alter or modify the Redemption Right and
REIT Shares Amount as set forth in Sections 8.6 and 11.2.B, and the related
definitions, in a manner adverse to such Partner, (v) cause the termination of
the Partnership prior to the time set forth in Sections 2.5 or 13.1, or (vi)
amend this Section 14.1.C. Further, no amendment may alter the restrictions on
the General Partner's authority set forth in Section 7.3 without the Consent
specified in that section.
D. Notwithstanding Section 14.1.A or Section 14.1.B hereof, the General
Partner shall not amend Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2 without the
Consent of 75% of the Percentage Interests of the Limited Partners excluding
Limited Partners Interests held by the General Partner.
Section 14.2 Meetings of the Partners
------------------------
A. Meetings of the Partners may be called by the General Partner and shall
be called upon the receipt by the General Partner of a written request by
Limited Partners holding twenty percent (20%) or more of the Partnership
Interests (not including any interest on account of the Series A Preferred Units
or the Series Z Preferred Units). The call shall state the nature of the
business to be transacted. Notice of any such meeting shall be given to all
Partners not less than seven (7) days nor more than thirty (30) days prior to
the date of such meeting. Partners may vote in person or by proxy at such
meeting. Whenever the vote or Consent of the Partners is permitted or required
under this Agreement, such vote or Consent may be given at a meeting of the
Partners or may be given in accordance with the procedure prescribed in Section
14.1.A hereof. Except as otherwise expressly provided in this Agreement, the
Consent of holders of a majority of the Percentage Interests held by Limited
Partners (including Limited Partnership Interests held by the General Partner)
shall control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by 75% of the Percentage Interests of the Partners (or
such other percentage as is expressly required by this Agreement). Such consent
may be in one instrument or in several instruments, and shall have the same
<PAGE>
Page-55
force and effect as a vote of 75% of the Percentage Interests of the Partners
(or such other percentage as is expressly required by this Agreement). Such
consent shall be filed with the General Partner. An action so taken shall be
deemed to have been taken at a meeting held on the effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to act for him
by proxy on all matters in which a Limited Partner is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited Partner executing it, such
revocation to be effective upon the Partnership's receipt of or written notice
such revocation from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to such rules
for the conduct of the meeting as the General Partner or such other Person deems
appropriate. Without limitation, meetings of Partners may be conducted in the
same manner as meetings of the shareholders of the Gables Trust and may be held
at the same time, and as part of, meetings of the shareholders of the Gables
Trust.
E. The Series A Preferred Units do not have any voting rights with respect
to the Partnership, except that any action which would alter the economic rights
or preferences of the Series A Preferred Units in a manner which, if done with
respect to the Gables Trust Series A Preferred Shares would require a separate
class vote of such shares, shall only be taken if such separate class of shares
approves of such action by a vote taken in accordance with applicable law.
F. The Series Z Preferred Units do not have any voting rights with respect
to the Partnership, except that any action which would alter the economic rights
or preferences of the Series Z Preferred Units in a manner which, if done with
respect to the Gables Trust Series Z Preferred Shares would require a separate
class vote of such shares, shall only be taken if such separate class of shares
approves of such action by a vote taken in accordance with applicable law.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
--------------------
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by first class
United States mail or by other means of written communication to the Partner or
Assignee at the address set forth in Exhibit A or such other address of which
the Partner shall notify the General Partner in writing.
<PAGE>
Page-56
Section 15.2 Titles and Captions
-------------------
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals
--------------------
Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
Section 15.4 Further Action
--------------
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6 Creditors
---------
Other than as expressly set forth herein with respect to the Indemnitees,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver
------
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 15.8 Counterparts
------------
This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto.
<PAGE>
Page-57
Section 15.9 Applicable Law
--------------
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law.
Section 15.10 Invalidity of Provisions
------------------------
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.11 Entire Agreement
----------------
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes the Prior
Agreement and any other prior written or oral understandings or agreements among
them with respect thereto.
Section 15.12 Guaranty by the Gables Trust
----------------------------
The Gables Trust unconditionally and irrevocably guarantees to the Limited
Partners the performance by the General Partner of the General Partner's
obligations under this agreement. This guarantee is exclusively for the benefit
of the Limited Partners and shall not extend to the benefit any creditor of the
Partnership.
<PAGE>
Page-58
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Agreement of Limited Partnership as of the date first written above.
GENERAL PARTNER:
Gables GP, Inc.
By: /s/ Marvin R. Banks, Jr.
-----------------------------
Marvin R. Banks, Jr.
Chief Financial Officer
THE LIMITED PARTNERS AS SET FORTH ON
EXHIBIT A HERETO:
By: Gables GP, Inc., as attorney
-in-fact pursuant to the
power of attorney set forth
in Section 2.4 hereof
By: /s/ Marvin R. Banks, Jr.
------------------------------
Marvin R. Banks, Jr.
Chief Financial Officer
GABLES REALTY LIMITED PARTNERSHIP
The Banks Listed Herein
WACHOVIA BANK, N.A.,
as Administrative Agent,
FIRST UNION NATIONAL BANK,
as Syndication Agent,
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Documentation Agent
<PAGE>
TABLE OF CONTENTS
AMENDED AND RESTATED CREDIT AGREEMENT
Page
--------
ARTICLE I
- ---------
DEFINITIONS..................................................................1
SECTION 1.01. Definitions....................................................1
SECTION 1.02. Accounting Terms and Determinations............................18
SECTION 1.03. References.....................................................18
SECTION 1.04. Use of Defined Terms...........................................19
SECTION 1.05. Terminology....................................................19
ARTICLE II
- ----------
THE CREDITS..................................................................19
SECTION 2.01. Commitments to Lend............................................19
SECTION 2.02. Method of Borrowing............................................19
SECTION 2.02A. Money Market Loans............................................22
SECTION 2.03. Notes..........................................................25
SECTION 2.04. Maturity of Loans..............................................26
SECTION 2.05. Interest Rates.................................................27
SECTION 2.06. Fees...........................................................30
SECTION 2.07. Optional Termination or Reduction of Commitments...............30
SECTION 2.08. Mandatory Reduction and Termination of Commitments.............31
SECTION 2.09. Optional Prepayments...........................................31
SECTION 2.10. Mandatory Prepayments..........................................31
SECTION 2.11. General Provisions as to Payments..............................32
SECTION 2.12. Computation of Interest and Fees...............................33
<PAGE>
ARTICLE III
CONDITIONS TO BORROWINGS.....................................................34
SECTION 3.01. Conditions to First Borrowing..................................34
SECTION 3.02. Conditions to All Borrowings...................................36
ARTICLE IV
REPRESENTATIONS AND WARRANTIES...............................................37
SECTION 4.01. Partnership or Corporate Existence and Power...................37
SECTION 4.02. Partnership or Corporate and Governmental
Authorization; No Contravention.........................37
SECTION 4.03. Binding Effect.................................................37
SECTION 4.04. Financial and Property Information.............................38
SECTION 4.05. No Litigation..................................................38
SECTION 4.06. Compliance with ERISA..........................................38
SECTION 4.07. Compliance with Laws; Payment of Taxes.........................38
SECTION 4.08. Subsidiaries...................................................39
SECTION 4.09. Investment Company Act.........................................39
SECTION 4.10. Public Utility Holding Company Act.............................39
SECTION 4.11. Ownership of Property..........................................39
SECTION 4.12. No Default.....................................................39
SECTION 4.13. Full Disclosure................................................40
SECTION 4.14. Environmental Matters..........................................40
SECTION 4.15. Partner Interests and Capital Stock............................40
SECTION 4.16. Margin Stock...................................................41
SECTION 4.17. Insolvency.....................................................41
SECTION 4.18. Insurance......................................................41
SECTION 4.19. Real Estate Investment Trust...................................42
SECTION 4.20. Millennium Compliance..........................................42
<PAGE>
ARTICLE V
COVENANTS....................................................................42
SECTION 5.01. Information....................................................42
SECTION 5.02. Inspection of Property, Books and Records......................44
SECTION 5.03. Total Secured Debt.............................................45
SECTION 5.04. Ratio of Total Debt to Total Assets Value......................45
SECTION 5.05. Interest Coverage..............................................45
SECTION 5.06. Restricted Payments............................................45
SECTION 5.07. Loans or Advances..............................................45
SECTION 5.09. Investments....................................................46
SECTION 5.10. Dissolution....................................................47
SECTION 5.11. Consolidations, Mergers and Sales of Assets....................47
SECTION 5.12. Use of Proceeds................................................48
SECTION 5.13. Compliance with Laws; Payment of Taxes.........................48
SECTION 5.14. Insurance......................................................48
SECTION 5.15. Change in Fiscal Year..........................................49
SECTION 5.16. Maintenance of Property; Principal Business....................49
SECTION 5.17. Environmental Notices..........................................49
SECTION 5.18. Environmental Matters..........................................49
SECTION 5.19. Environmental Release..........................................49
SECTION 5.20. Transactions with Affiliates...................................49
SECTION 5.21. Amendment of Other Agreements..................................50
SECTION 5.22. Qualification as a Real Estate Investment Trust;
General Partner...........................................50
SECTION 5.24. Certain Provisions Regarding Eligible Properties...............50
SECTION 5.25 Restrictions of Certain Additional Guarantees..................51
SECTION 5.26 Maintenance of Existence.......................................51
<PAGE>
SECTION 5.27 Ratio of Total Unencumbered Assets Value to
Unsecured Funded Debt......................................51
<PAGE>
ARTICLE VI
DEFAULTS.....................................................................51
SECTION 6.01. Events of Default..............................................51
SECTION 6.02. Notice of Default..............................................54
ARTICLE VII
THE ADMINISTRATIVE AGENT.....................................................54
SECTION 7.01. Appointment; Powers and Immunities.............................54
SECTION 7.02. Reliance by Administrative Agent...............................55
SECTION 7.03. Defaults.......................................................55
SECTION 7.04. Rights of Administrative Agent and its Affiliates
as a Bank................................................56
SECTION 7.05. Indemnification................................................56
SECTION 7.06 Consequential Damages..........................................57
SECTION 7.07. Payee of Note Treated as Owner.................................57
SECTION 7.08. Nonreliance on Administrative Agent and Other Banks............57
SECTION 7.09. Failure to Act.................................................58
SECTION 7.10. Resignation or Removal of Administrative Agent.................58
SECTION 7.11 Administrative Agent's Right to Replace Non-Qualifying Bank....59
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION........................................60
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.......60
SECTION 8.02. Illegality.....................................................60
<PAGE>
SECTION 8.03. Increased Cost and Reduced Return..............................61
SECTION 8.04. Base Rate Loans Substituted for Affected Euro-Dollar Loans.....62
SECTION 8.05. Compensation...................................................62
ARTICLE IX
MISCELLANEOUS................................................................63
SECTION 9.01. Notices........................................................63
SECTION 9.02. No Waivers.....................................................63
SECTION 9.03. Expenses; Documentary Taxes....................................64
SECTION 9.04. Indemnification................................................64
SECTION 9.05. Sharing of Setoffs.............................................65
SECTION 9.06. Amendments and Waivers.........................................65
SECTION 9.07. No Margin Stock Collateral.....................................66
SECTION 9.08. Successors and Assigns.........................................66
SECTION 9.09. Confidentiality................................................68
SECTION 9.10. Representation by Banks........................................69
SECTION 9.11. Obligations Several............................................69
SECTION 9.12. Georgia Law....................................................69
SECTION 9.13. Severability...................................................70
SECTION 9.14. Interest.......................................................70
SECTION 9.15. Interpretation.................................................71
SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction..................71
SECTION 9.17. Counterparts...................................................71
SECTION 9.18. Source of Funds -- ERISA.......................................71
SECTION 9.19. Entire Agreement...............................................71
SECTION 9.20. More Restrictive Agreements....................................72
<PAGE>
EXHIBIT A-1 Form of Syndicated Loan Note
EXHIBIT A-2 Form of Money Market Loan Note
EXHIBIT B Form of Opinion of Counsel for the Borrower
EXHIBIT C Form of Opinion of Special Counsel for the Administrative Agent
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Closing Certificate
EXHIBIT H Form of Borrowing Base Certificate
EXHIBIT I * Form of Guaranty
EXHIBIT J * Form of Contribution Agreement
EXHIBIT K Form of Money Market Quote Request
EXHIBIT L Form of Money Market Quote
Schedule 4.08 Subsidiaries
* Enclosed herewith
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 13, 1998 among GABLES
REALTY LIMITED PARTNERSHIP, the BANKS listed on the signature pages hereof,
WACHOVIA BANK, N.A., as Administrative Agent, FIRST UNION NATIONAL BANK, as
Syndication Agent, and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as
Documentation Agent.
The parties hereto agree as follows:
This Amended and Restated Credit Agreement is an amendment and restatement
of the $175,000,000 Credit Agreement by and among the Borrower, Wachovia Bank,
N.A. (successor by merger to Wachovia Bank of Georgia, N.A.), First Union
National Bank (successor by merger to First Union National Bank of Georgia),
Guaranty Federal Bank, F.S.B., AmSouth Bank and Commerzbank AG, Atlanta Agency,
and Wachovia Bank, N.A. (successor by merger to Wachovia Bank of Georgia, N.A.),
as the Agent, dated as of March 28, 1996, as amended prior to the date hereof by
First Amendment to Credit Agreement dated as of November 22, 1996, Second
Amendment to Credit Agreement dated as of March 19, 1997 and Amended and
Restated Credit Agreement dated as of August 5, 1997 (as so amended and amended
and restated, the "Original Agreement"), which is superseded hereby.
ARTICLE I
DEFINITIONS
SECTION 1.01 - DEFINITIONS. The terms as defined in this Section 1.01
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein:
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.05(c).
"Affiliate" of any relevant Person means (i) any Person that directly, or
indirectly through one or more intermediaries, controls the relevant Person (a
"Controlling Person"), (ii) any Person (other than the relevant Person or a
Subsidiary of the relevant Person) which is controlled by or is under common
control with a Controlling Person, or (iii) any Person (other than a Subsidiary
of the relevant Person) of which the relevant Person owns, directly or
indirectly, 20% or more of the common stock or equivalent equity interests. As
used herein, the term "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
<PAGE>
"Administrative Agent" means Wachovia Bank, N.A., a national banking
association organized under the laws of the United States of America, in its
capacity as administrative agent for the Banks hereunder, and its successors and
permitted assigns in such capacity.
"Administrative Agent's Letter Agreement" means that certain letter
agreement, dated as of June 24, 1997 between the Borrower and the Administrative
Agent, but only as it relates to certain fees from time to time payable by the
Borrower to the Administrative Agent.
"Agreement" means this Credit Agreement, together with all amendments and
supplements hereto.
"Applicable Margin" has the meaning set forth in Section 2.05(a).
"Assignee" has the meaning set forth in Section 9.08(c).
"Assignment and Acceptance" means an Assignment and Acceptance executed in
accordance with Section 9.08(c) in the form attached hereto as Exhibit D.
"Authority" has the meaning set forth in Section 8.02.
"Bank" means each bank listed on the signature pages hereof as having a
Commitment, and its successors and assigns.
"Base Rate" means for any Base Rate Loan for any day, the rate per annum
equal to the higher as of such day of (i) the Prime Rate, or (ii) three quarters
of one percent above the Federal Funds Rate. For purposes of determining the
Base Rate for any day, changes in the Prime Rate or the Federal Funds Rate shall
be effective on the date of each such change.
<PAGE>
"Base Rate Loan" means a Loan which bears or is to bear interest at a rate
based upon the Base Rate, and is to be made as a Base Rate Loan pursuant to the
applicable Notice of Borrowing, Section 2.02(f), or Article VIII, as applicable.
"Borrower" means Gables Realty Limited Partnership, a Delaware limited
partnership, and its successors and its permitted assigns.
"Borrowing" means a borrowing hereunder consisting of Syndicated Loans or
Money Market Loans. A Borrowing is a "Syndicated Borrowing" if such Loans are
Syndicated Loans, a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans,
a "Money Market Borrowing" if such Loans are Money Market Loans and a "Fixed
Rate Borrowing" if such Loans are Fixed Rate Loans.
"Borrowing Base" means the sum of each of the following, as determined by
reference to the most recent Borrowing Base Certificate furnished pursuant to
Section 3.01(h) or Section 5.01(h), as applicable:
(i) an amount equal to the product of: (x) 7.22222; times (y) the Net
Operating Income for the 12 month period ending on the last day of the
month just ended prior to the date of determination, from each Eligible
Property which either was on average at least 90% Economically Occupied
during, or with respect to which the Construction Period Termination Date
occurred prior to the commencement of, such 12 month period; provided, that
if an Eligible Property satisfies the criteria set forth in both this
clause (i) and in clause (ii) below, it shall be included in the
calculations only in this clause (i); plus
(ii) an amount equal to the product of: (x) 28.88889; times (y) the
Net Operating Income for the 3 month period ending on the last day of the
month just ended prior to the date of determination, from each Eligible
Property with respect to which the Construction Period Termination Date did
not occur prior to the commencement of the 12 month period ending on the
last day of the month just ended prior to the date of determination; plus
(iii) an amount equal to the lesser of: (x) 50% of the aggregate
amount of cash expenditures (including indirect costs internally allocated
in accordance with GAAP) as of the last day of the month just ended prior
to the date of determination on all Eligible Properties which consist of
Properties as to which the Construction Period Termination Date has not
occurred as of such last day of the month just ended (provided, that no
more than an aggregate of $5,000,000 for all Eligible Properties shall be
included for land on which construction has not commenced); and (y)
$50,000,000; less
<PAGE>
(iv) the aggregate amount of all outstanding unsecured Consolidated
Debt including standby letters of credit, but excluding the outstanding
balance under this Agreement.
"Borrowing Base Certificate" means a certificate substantially in the form
of EXHIBIT H, duly executed by the chief financial officer of the General
Partner, setting forth in reasonable detail the calculations for each component
of the Borrowing Base, and certifying availability of funds sufficient to
complete all Eligible Properties then under construction.
"Capital Stock" means any nonredeemable capital stock or shares of
beneficial ownership of GBP or any Consolidated Subsidiary (to the extent issued
to a Person other than GBP), whether common or preferred.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. 9601 et. seq. and its implementing regulations and
amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation and
Liability Inventory System established pursuant to CERCLA.
"Change in Control" shall mean the occurrence of any of the following:
(i) more than 50% of the outstanding voting common stock of GBP is owned,
directly or indirectly, by less than 6 "individuals" (as provided in Section
542(a)(2) of the Code); or (ii) a majority of the Persons comprising the Board
of Directors of GBP shall during any 12 month period cease to serve on the Board
of Directors of GBP for any reason other than disability or death; or (iii) the
Borrower or any Guarantor shall fail to maintain their current partnership or
corporate status; or (iv) GBP shall fail to own at least 65% of the partnership
interests in the Borrower; or (v) the Borrower shall fail to own at least 99% of
the partnership interests in Gable-Tennessee Properties and Candlewood-Indian
Creek, L.P.
<PAGE>
"Change of Law" shall have the meaning set forth in Section 8.02.
"Closing Certificate" has the meaning set forth in Section 3.01(e).
"Closing Date" means May 13, 1998.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
"Commitment" means, with respect to each Bank, (i) the amount set forth
opposite the name of such Bank on the signature pages hereof, and (ii) as to any
Bank which enters into any Assignment and Acceptance (whether as transferor Bank
or as Assignee thereunder), the amount of such Bank's Commitment after giving
effect to such Assignment and Acceptance, in each case as such amount may be
reduced from time to time pursuant to Sections 2.07 and 2.08.
"Compliance Certificate" has the meaning set forth in Section 5.01(c).
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Income Available for Debt Service" shall mean, calculated on
a consolidated basis, the sum of the Borrower's and its Subsidiaries': (i) net
income before minority interests and extraordinary items in accordance with
GAAP, plus (ii) depreciation and amortization, plus (iii) losses from sales or
joint ventures, plus (iv) increases in deferred taxes and other non-cash items,
minus (v) gains from sales or joint ventures, minus (vi) decreases in deferred
taxes and other non-cash items, plus (vii) interest expense and letter of credit
fees on tax exempt bonds and plus (viii) taxes (excluding ad valorem taxes).
"Consolidated Income Available for Distribution" means, in any calendar
year, the sum of the following for such calendar year, calculated on a
consolidated basis for the Borrower and its Subsidiaries: (i) Consolidated
Income Available for Debt Service, less (ii) interest expense and letter of
credit fees on tax exempt bonds, and less (iii) taxes (excluding ad valorem
taxes and taxes on gains described in clause (v) of the definition of
Consolidated Income Available for Debt Service).
<PAGE>
"Consolidated Interest Expense" for any period means interest in respect of
Debt (excluding capitalized interest) of the Borrower or any of its Consolidated
Subsidiaries outstanding during such period.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which, in accordance with GAAP, would be consolidated with those
of the Borrower in its consolidated financial statements as of such date.
"Consolidated Total Assets" means, at any time, the total assets of the
Borrower and its Consolidated Subsidiaries, determined on a consolidated basis,
as set forth or reflected on the most recent consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries, prepared in accordance with GAAP.
"Contribution Agreement" means the Contribution Agreement of even date
herewith in substantially the form of Exhibit J to be executed by the Borrower
and the Guarantors.
"Construction Period Termination Date" means, with respect to construction
of Multi-Family Properties for Eligible Properties, the date which is 3 months
after the issuance of a permanent certificate of occupancy for the last unit of
such Multi-Family Property which is an Eligible Property.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Code.
"Current Maturities of Long Term Debt" means all payments in respect of
Long Term Debt (other than Debt under this Agreement) that are required to be
made within one year from the date of determination, whether or not the
obligation to make such payments would constitute a current liability of the
obligor under GAAP, excluding, however, any such payment required to be made on
the ultimate maturity date of such Debt.
<PAGE>
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under capital leases,
(v) all obligations of such Person to reimburse any bank or other Person in
respect of amounts payable under a banker's acceptance, (vi) all Redeemable
Preferred Stock of such Person (in the event such Person is a corporation),
(vii) all obligations of such Person to reimburse any bank or other Person in
respect of amounts paid or to be paid or to be paid under a letter of credit or
similar instrument, (viii) all obligations of others secured by a Lien on any
asset of such Person, whether or not such obligations are assumed by such
Person, and (ix) all obligations of others Guaranteed by such Person.
"Debt Rating" means at any time whichever is the higher of the rating of
the Borrower's senior unsecured, unenhanced debt (or, if no such debt exists,
its issuer credit rating for debt of such type) by Moody's Investor Service or
Standard and Poor's (as such rating may change from time to time, either
pursuant to Section 2.05(f) or otherwise) (provided, that in the event of a
double or greater split rating, the rating immediately above the lower rating
shall apply), or if only one of them rates the Borrower's senior unsecured,
unenhanced debt, such rating.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day, the sum of 2%
plus the interest rate (including the Applicable Margin) which is applicable to
such Loan hereunder.
"Dollars" or "$" means dollars in lawful currency of the United States of
America.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in Georgia are authorized by law to close
(including, without limitation, any day which is a federal banking holiday in
the United States of America).
<PAGE>
"Economically Occupied" means, with respect to any Eligible Property or
Multi-Family Property and in reference to a specified percentage, that tenants
paying rental obligations are occupying at least the specified percentage of the
total number of units at such Eligible Property or Multi-Family Property, as the
case may be.
"Eligible Property" means (i) a Multi-Family Property of the Borrower or
any of the Guarantors consisting of real estate as to which there is no Mortgage
in existence encumbering such Property and (ii) the Wachovia LC Properties, and
such Multi-Family Property or Wachovia LC Property is subject to no other Liens
or encumbrances, other than Permitted Encumbrances.
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or orders
arising from or in any way associated with any Environmental Requirements,
whether or not entered upon consent, or written agreements with an Environmental
Authority or other entity arising from or in any way associated with any
Environmental Requirement, whether or not incorporated in a judgment, decree or
order.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental Authority or by
any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any violation of any
Environmental Requirement or any investigations concerning any violation of any
Environmental Requirement.
<PAGE>
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or under any
applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or the Properties, including but not limited to any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Euro-Dollar Loan" means a Loan which bears or is to bear interest at a
rate based upon the Adjusted London Interbank Offered Rate, and to be made as a
Euro-Dollar Loan pursuant to the applicable Notice of Borrowing.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.05(d).
"Event of Default" has the meaning set forth in Section 6.01.
"Executive Officer" means any of the following officers of the General
Partner: the chairman, the president, the chief financial officer, the chief
accounting officer, any senior vice president and the secretary.
<PAGE>
"Facility Fee" has the meaning set forth in Section 2.06(a).
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Domestic Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to the Administrative Agent on such
day on such transactions, as determined by the Administrative Agent.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower.
"Fixed Rate Loan" means any Euro-Dollar Loan or Money Market Loan.
"Funded Debt" means, without duplication, Long-Term Debt plus Current
Maturities of Long-Term Debt.
"GAAP" means generally accepted accounting principles applied on a basis
consistent with those which, in accordance with Section 1.02, are to be used in
making the calculations for purposes of determining compliance with the terms of
this Agreement.
"GBP" means Gables Residential Trust, a Maryland trust.
"General Partner" means the sole general partner of the Borrower (which, on
the Closing Date, is Gables GP, Inc.) or, if there is more than one such general
partner, the managing general partner of the Borrower.
<PAGE>
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
secure, purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to provide collateral security, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guaranty" means the Guaranty Agreement of even date herewith in
substantially the form of Exhibit I to be executed by the Guarantors,
unconditionally and jointly and severally Guaranteeing payment of the Loans, the
Notes and all other obligations of the Borrower to the Administrative Agent and
the Banks hereunder, including without limitation all principal, interest, fees,
costs, and compensation and indemnification amounts.
"Guarantors" means any one or more or all of the following, as the context
shall require: (i) GBP, Gables GP, Inc., a Texas corporation, and
Gables-Tennessee Properties, a Tennessee general partnership; and (ii) any
Significant Subsidiary which becomes a Guarantor pursuant to Section 5.23; and
(iii) any other Subsidiary which elects to become a Guarantor pursuant to
Section 5.23; in each case subject to the provisions of the last sentence of
Section 5.11.
"Hazardous Materials" includes, without limitation, (a) solid or hazardous
waste, as defined in the Resource Conservation and Recovery Act of 1980, 42
U.S.C. 6901 et seq. and its implementing regulations and amendments, or in any
applicable state or local law or regulation, (b) "hazardous substance",
"pollutant", or "contaminant" as defined in CERCLA, or in any applicable state
or local law or regulation, (c) gasoline, or any other petroleum product or
by-product, including, crude oil or any fraction thereof, (d) toxic substances,
as defined in the Toxic Substances Control Act of 1976, or in any applicable
state or local law or regulation and (e) insecticides, fungicides, or
rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide
Act of 1975, or in any applicable state or local law or regulation, as each such
Act, statute or regulation may be amended from time to time.
<PAGE>
"Interest Period" means: (1) with respect to each Euro-Dollar Borrowing,
the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the first, second, third or sixth month
thereafter, as the Borrower may elect in the applicable Notice of Borrowing;
provided that:
(a) any Interest Period (subject to paragraph (c) below) which would
otherwise end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall,
subject to paragraph (c) below, end on the last Euro-Dollar Business Day of
the appropriate subsequent calendar month; and
(c) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
(2) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (subject to paragraph (b) below) which would
otherwise end on a day which is not a Domestic Business Day shall be
extended to the next succeeding Domestic Business Day; and
<PAGE>
(b) no Interest Period which begins before the Termination Date and
would otherwise end after the Termination Date may be selected.
(3) with respect to each Money Market Borrowing, the period commencing on the
date of such Borrowing and ending on the Stated Maturity Date or such other date
or dates as may be specified in the applicable Money Market Quote; provided
that:
(a) any Interest Period (subject to clause (b) below) which would
otherwise end on a day which is not a Domestic Business Day shall be
extended to the next succeeding Domestic Business Day; and
(b) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
"Investment" means any investment in any Person, whether by means of
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, making of a time
deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise.
"Lending Office" means, as to each Bank, its office located at its address
set forth on the signature pages hereof (or identified on the signature pages
hereof as its Lending Office) or such other office as such Bank may hereafter
designate as its Lending Office by notice to the Borrower and the Administrative
Agent.
"Lien" means, with respect to any asset, any mortgage, deed to secure debt,
deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
<PAGE>
"Loan" means a Base Rate Loan, Euro-Dollar Loan, Money Market Loan or
Syndicated Loan, and "Loans" means Base Rate Loans, Euro-Dollar Loans, Money
Market Loans or Syndicated Loans, or any or all of them, as the context shall
require.
"Loan Documents" means this Agreement, the Notes, the Guaranty, the
Contribution Agreement, any other document evidencing, relating to or securing
the Loans, and any other document or instrument delivered from time to time in
connection with this Agreement, the Notes or the Loans, as such documents and
instruments may be amended or supplemented from time to time.
"London Interbank Offered Rate" has the meaning set forth in Section
2.05(d).
"Long-Term Debt" means at any date any Consolidated Debt which matures (or
the maturity of which may at the option of the Borrower or any Consolidated
Subsidiary be extended such that it matures) more than one year after such date.
"Margin Stock" means "margin stock" as defined in Regulations G, T, U or X.
"Material Adverse Effect" means, with respect to any event, act, condition
or occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (a) the financial
condition, operations, business or properties of GBP, the General Partner, the
Borrower and its Consolidated Subsidiaries taken as a whole, (b) the rights and
remedies of the Administrative Agent or the Banks under the Loan Documents, or
the ability of the Borrower to perform its obligations under the Loan Documents
to which it is a party, as applicable, or (c) the legality, validity or
enforceability of any Loan Document.
"Money Market Borrowing Date" has the meaning specified in Section 2.02A.
<PAGE>
"Money Market Loan" means any Loan made by one or more of the Banks
pursuant to Section 2.02(A).
"Money Market Loan Notes" means the promissory notes of the Borrower,
substantially in the form of Exhibit A-2, evidencing the obligation of the
Borrower to repay the Money Market Loans, together with all amendments,
consolidations, modifications, renewals and supplements thereto.
"Money Market Quote" has the meaning specified in Section 2.02A.
"Money Market Quote Request" has the meaning specified in Section 2.02A(b).
"Money Market Rate" has the meaning specified in Section 2.02A(c)(ii)(C).
"Mortgage" means a mortgage, deed to secure debt, deed of trust or similar
instrument.
"Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3)
of ERISA.
"Multi-Family Property" means residential apartment communities and
undeveloped land acquired for development thereof.
"Net Operating Income" means, for any Multi-Family Property, the portion of
Consolidated Income Available for Debt Service derived from such Multi-Family
Property (which calculation includes an assumed 4% for management services).
"Notes" means each of the Syndicated Loan Notes or Money Market Loan Notes,
or any or all of them, as the context shall require.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Officer's Certificate" has the meaning set forth in Section 3.01(f).
<PAGE>
"Original Agreement" has the meaning set forth in the preamble hereto.
"Original Notes" means the Notes executed and delivered pursuant to the
Original Agreement.
"Participant" has the meaning set forth in Section 9.08(b).
"Partner Interests" means any partner interests in the Borrower, whether
limited or general.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Encumbrances" means, with respect to any Eligible Property
included in the Borrowing Base, (i) Liens incidental to the conduct of its
business or the ownership of its assets which (x) do not secure Debt and (y) do
not in the aggregate materially detract from the value of its assets or
materially impair the use thereof in the operation of its business, (ii) any
Mortgage in favor of the relevant institutional trustee only (but not in favor
of Wachovia, as letter of credit issuer), with respect to the Wachovia LC
Properties, and (iii) any other Liens and encumbrances expressly consented to by
the Administrative Agent.
"Performance Pricing Determination Date" has the meaning set forth in
Section 2.05(a).
"Person" means an individual, a corporation, a partnership, an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is covered
by Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code and is either (i) maintained by a member of the Controlled Group
for employees of any member of the Controlled Group or (ii) maintained pursuant
to a collective bargaining agreement or any other arrangement under which more
than one employer makes contributions and to which a member of the Controlled
Group is then making or accruing an obligation to make contributions or has
within the preceding 5 plan years made contributions.
<PAGE>
"Prime Rate" refers to that interest rate so denominated and set by
Wachovia from time to time as an interest rate basis for borrowings. The Prime
Rate is but one of several interest rate bases used by Wachovia. Wachovia lends
at interest rates above and below the Prime Rate.
"Properties" means all real property owned, leased or otherwise used or
occupied by the Borrower or any Subsidiary, wherever located.
"Redeemable Preferred Stock" of any Person means any preferred stock issued
by such Person which is at any time prior to the Termination Date either (i)
mandatorily redeemable for cash (by sinking fund or similar payments or
otherwise) or (ii) redeemable for cash at the option of the holder thereof.
"Refunding Loan" means a new Syndicated Loan made on the day on which an
outstanding Syndicated Loan is maturing or a Base Rate Borrowing is being
converted to a Euro-Dollar Rate Borrowing, if and to the extent that the
proceeds thereof are used entirely for the purpose of paying such maturing Loan
or Loan being converted, excluding any difference between the amount of such
maturing Loan or Loan being converted and any greater amount being borrowed on
such day and actually either being made available to the Borrower pursuant to
Section 2.02(c) or remitted to the Administrative Agent as provided in Section
2.11, in each case as contemplated in Section 2.02(d).
"Regulation G" means Regulation G of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
<PAGE>
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Required Banks" means at any time Banks having at least 66 2/3% of the
aggregate amount of the Commitments or, if the Commitments are no longer in
effect, Banks holding at least 66 2/3% of the aggregate outstanding principal
amount of the sum of the (i) Syndicated Loans and (ii) Money Market Loans.
"Restricted Payment" means (i) any distribution on any Partner Interests
(other than distributions consisting solely of additional Partner Interests) or
(ii) any payment on account of the purchase, redemption, retirement or
acquisition of (a) any Partner Interests or (b) any option, warrant or other
right to acquire Partner Interests.
"Significant Subsidiary" means any Subsidiary which either (x) has assets
which constitute more than 5% of Consolidated Total Assets at the end of the
most recent Fiscal Quarter, or (y) contributed more than 5% of Consolidated
Income Available for Debt Service during the most recent Fiscal Quarter and the
3 Fiscal Quarters immediately preceding such Fiscal Quarter (or, with respect to
any Subsidiary which existed during the entire 4 Fiscal Quarter period but was
acquired by the Borrower during such period, which would have contributed more
than 5% of Consolidated Income Available for Debt Service during such period had
it been a Subsidiary for the entire period).
"South Florida Acquisition" means the Borrower's acquisition of the
properties and operations of Trammell Crow Residential South Florida ("TCR/SF"),
which consists of up to 15 multifamily apartment communities containing a total
of 4,197 apartment homes and all of TCR/SF's residential construction and
development and third party management activities in South Florida, pursuant to
a definitive purchase agreement containing terms which include total
consideration of $368,250,000, consisting of $77,375,000 in common stock or
operating apartment units, $155,000,000 in cash and the assumption of
$135,875,000 in tax-exempt debt.
<PAGE>
"Stated Maturity Date" means, with respect to any Money Market Loan, the
Stated Maturity Date therefor specified by the Bank in the applicable Money
Market Quote.
"Subsidiary" means (i) any corporation or other entity the majority of the
shares of the non-voting capital stock or other equivalent ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower and/or GBP, and the majority of the shares of
the voting capital stock or other equivalent ownership interests of which
(except directors' qualifying shares) are at the time directly or indirectly
owned by the Borrower, GBP, the General Partner, another Subsidiary, and/or one
or more of Marcus E. Bromley, John T. Rippel, Marvin R. Banks, Jr. and C. Jordan
Clark (or, in the event of death or disability of any of the foregoing
individuals, his respective legal representative(s)), or such individuals'
successors in office as an officer of such Subsidiary or the Secretary of such
Subsidiary, and (ii) any other entity (other than GBP or the Borrower) the
accounts of which are consolidated with the accounts of the Borrower.
"Syndicated Loans" means Base Rate Loans or Euro-Dollar Loans made pursuant
to the terms and conditions set forth in Section 2.01.
"Syndicated Loan Notes" means the promissory notes of the Borrower,
substantially in the form of Exhibit A-1, evidencing the obligation of the
Borrower to repay Syndicated Loans, together with all amendments,
consolidations, modifications, renewals and supplements thereto.
"Taxes" has the meaning set forth in Section 2.11(c).
"Termination Date" means May 13, 2001, provided, that if any of the
following events occur, the Termination Date shall be such earlier date or later
date as is applicable pursuant to the following: (i) such later date to which it
is extended by the Banks pursuant to Section 2.04(b), in their sole and absolute
discretion; (ii) such earlier date on which the Commitments are terminated
pursuant to Section 2.08 following the occurrence of a Change in Control; (iii)
such earlier date on which the Commitments are terminated pursuant to Section
6.01 following the occurrence of an Event of Default; or (iv) such earlier date
on which the Borrower terminates the Commitments entirely pursuant to Section
2.07.
<PAGE>
"Third Parties" means all lessees, sublessees, licensees and other users of
the Properties, excluding those users of the Properties in the ordinary course
of the Borrower's business and on a temporary basis.
"Total Assets Value" means the sum of:
(i) the quotient of (x) the Net Operating Income for the 12 month
period ending on the last day of the month just ended prior to the date of
determination, from each Multi-Family Property which either was on average
at least 90% Economically Occupied during, or with respect to which the
Construction Period Termination Date occurred prior to the commencement of,
such 12 month period, divided by (y) 0.09; provided, that if an Eligible
Property satisfies the criteria set forth in both this clause(i) and in
clause (ii) below, it shall be included in the calculations only in clause
(ii) below; plus
(ii) an amount equal to the quotient of (x) 400% of the Net Operating
Income for the 3 month period ending on the last day of the month just
ended prior to the date of determination, from each Multi-Family Property
with respect to which the Construction Period Termination Date did not
occur prior to the commencement of the 12 month period ending on the last
day of the month just ended prior to the date of determination, divided by
(y) 0.09; plus
(iii) an amount equal to 50% of the aggregate amount of cash
expenditures (including indirect costs internally allocated in accordance
with GAAP) as of the last day of the month just ended prior to the date of
determination on all Multi-Family Properties as to which the Construction
Period Termination Date has not occurred as of such last day of the month
just ended.
"Total Debt" shall mean the sum (without duplication) of (i) total
liabilities of the Borrower and the Guarantors, on a consolidated basis, plus
(ii) the aggregate amount of Debt Guaranteed by the Borrower, the Guarantors and
the other Subsidiaries (other than Guarantees which have been fully cash
collateralized), plus the face amount of all letters of credit for which any of
the Borrower or the Guarantors is the account party, determined at the end of
the Borrower's most recent Fiscal Quarter.
<PAGE>
"Total Secured Debt" shall mean, without duplication, all Debt of the
Borrower and the Guarantors consisting of: (i) capitalized leases; (ii) money
borrowed or the deferred purchase price of real property which is also secured
by a Mortgage on any real property owned by the Borrower or any Guarantor; or
(iii) reimbursement obligations pertaining to any letter of credit.
"Total Unencumbered Assets Value" means Total Assets Value, but determined
with reference only to (i) Multi-Family Properties which are not subject to a
Mortgage and (ii) the Wachovia LC Properties.
"Transferee" has the meaning set forth in Section 9.08(d).
"Unsecured Funded Debt" means any Funded Debt which is not secured by a
Mortgage on any Property, other than, with respect to the Wachovia LC
Properties, any Permitted Encumbrance.
"Unused Commitment" means at any date, with respect to any Bank, an amount
equal to the sum of (i) its Commitment, less (ii) the aggregate outstanding
principal amount of its Syndicated Loans(but not its Money Market Loans).
"Wachovia" means Wachovia Bank, N.A., a national banking association, and
its successors.
"Wachovia LC Properties" means the following Properties, as to each of
which Wachovia has issued its unsecured letter of credit to an institutional
trustee as a credit enhancement for revenue bonds or similar instruments: the
Arbor Crest project, the Arbor Knoll project, the Wood Arbor project and the
Wood Crossing Project.
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of the
non-voting capital stock or other equivalent ownership interests of which
(except directors' qualifying shares) are at the time directly or indirectly
owned by the Borrower and/or GBP, and all of the shares of the voting capital
stock or other equivalent ownership interests of which are at the time directly
or indirectly owned by the Borrower, GBP, another Wholly Owned Subsidiary,
and/or one or more of Marcus E. Bromley, John T. Rippel, Marvin R. Banks, Jr.
and C. Jordan Clark (or, in the event of death or disability of any of the
foregoing individuals, his respective legal representative(s)), or such
individuals' successors in office as an officer of such Subsidiary or the
Secretary of such Subsidiary.
<PAGE>
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks unless with respect to any such change concurred in by the
Borrower's independent public accountants or required by GAAP, in determining
compliance with any of the provisions of this Agreement or any of the other Loan
Documents: (i) the Borrower shall have objected to determining such compliance
on such basis at the time of delivery of such financial statements, or (ii) the
Required Banks shall so object in writing within 30 days after the delivery of
such financial statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been made (which,
if objection is made in respect of the first financial statements delivered
under Section 5.01 hereof, shall mean the financial statements referred to in
Section 4.04).
SECTION 1.03. REFERENCES. Unless otherwise indicated, references in this
Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other
Subdivisions are references to articles, exhibits, schedules, sections and other
subdivisions hereof.
SECTION 1.04. USE OF DEFINED TERMS. All terms defined in this Agreement
shall have the same defined meanings when used in any of the other Loan
Documents, unless otherwise defined therein or unless the context shall require
otherwise.
<PAGE>
SECTION 1.05. TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural, and the plural shall
include the singular. Titles of Articles and Sections in this Agreement are for
convenience only, and neither limit nor amplify the provisions of this
Agreement.
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. (a) SYNDICATED LOANS. Each Bank
severally agrees, on the terms and conditions set forth herein, to make
Syndicated Loans to the Borrower from time to time before the Termination Date;
provided that,
(i) immediately after each such Syndicated Loan is made, the aggregate
outstanding principal amount of Syndicated Loans by such Bank shall not
exceed the amount of its Commitment, and
(ii) the aggregate outstanding principal amount of all Syndicated
Loans and Money Market Loans shall not exceed the lesser of (A) the
aggregate amount of the Commitments and (B) the Borrowing Base.
Each Syndicated Borrowing under this Section shall be in an aggregate principal
amount of $3,000,000 or any larger integral multiple of $500,000 (except that
any such Syndicated Borrowing may be in the aggregate amount of the Unused
Commitments) and shall be made from the several Banks ratably in proportion to
their respective Commitments. Within the foregoing limits, the Borrower may
borrow under this Section, repay or, to the extent permitted by Section 2.09,
prepay Syndicated Loans and reborrow under this Section at any time before the
Termination Date.
SECTION 2.02. METHOD OF BORROWING. (a) The Borrower shall give the
Administrative Agent notice (a "Notice of Borrowing"), which shall be
substantially in the form of Exhibit E, prior to 10:00 A.M. (Atlanta, Georgia
time) on the same Domestic Business Day for each Base Rate Borrowing and at
least 3 Euro-Dollar Business Days before each Euro-Dollar Borrowing, specifying:
<PAGE>
(i) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Borrowing is to be a Base Rate Borrowing or a
Euro-Dollar Borrowing,
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Administrative Agent shall
promptly notify each Bank of the contents thereof and of such Bank's ratable
share of such Borrowing and such Notice of Borrowing, once received by the
Administrative Agent, shall not thereafter be revocable by the Borrower.(c) Not
later than 2:00 P.M. (Atlanta, Georgia time) on the date of each Syndicated
Borrowing (or, if the notice required to be given by the Administrative Agent
pursuant to paragraph (b) of this Section shall be given later than 12:00 Noon,
Atlanta, Georgia time on the date of any Syndicated Borrowing, not later than
two (2) hours following the time such notice is given on the date of each
Syndicated Borrowing), each Bank shall (except as provided in paragraph (d) of
this Section) make available its ratable share of such Syndicated Borrowing, in
Federal or other funds immediately available in Atlanta, Georgia, to the
Administrative Agent at its address determined pursuant to Section 9.01. Unless
the Administrative Agent determines that any applicable condition specified in
Article IV has not been satisfied, the Administrative Agent will make the funds
so received from the Banks available to the Borrower at the Administrative
Agent's aforesaid address. Unless the Administrative Agent receives notice from
a Bank, at the Administrative Agent's address referred to in or specified
pursuant to Section 9.01, no later than 4:00 P.M. (local time at such address)on
<PAGE>
the Domestic Business Day before the date of a Syndicated Borrowing (or, with
respect to Base Rate Loans, by 2:00 P.M. on the date of such Syndicated
Borrowing) stating that such Bank will not make a Syndicated Loan in connection
with such Syndicated Borrowing, the Administrative Agent shall be entitled to
assume that such Bank will make a Syndicated Loan in connection with such
Syndicated Borrowing and, in reliance on such assumption, the Administrative
Agent may (but shall not be obligated to) make available such Bank's ratable
share of such Syndicated Borrowing to the Borrower for the account of such Bank.
If the Administrative Agent makes such Bank's ratable share available to the
Borrower as provided above and such Bank does not in fact make its ratable share
of such Syndicated Borrowing available on such date, the Administrative Agent
shall be entitled to recover such Bank's ratable share from such Bank or the
Borrower (and for such purpose shall be entitled to charge such amount to any
account of the Borrower maintained with the Administrative Agent), together with
interest thereon for each day during the period from the date of such Syndicated
Borrowing until such sum shall be paid in full at a rate per annum equal to the
rate at which the Administrative Agent determines that it obtained (or could
have obtained) overnight Federal funds to cover such amount for each such day
during such period, provided that (i) any such payment by the Borrower of such
Bank's ratable share and interest thereon shall be without prejudice to any
rights that the Borrower may have against such Bank and (ii) until such Bank has
paid its ratable share of such Syndicated Borrowing, together with interest
pursuant to the foregoing, it will have no interest in or rights with respect to
such Syndicated Borrowing for any purpose hereunder. If the Administrative Agent
does not exercise its option to advance funds for the account of such Bank, it
shall forthwith notify the Borrower of such decision.
(d) If any Bank makes a new Syndicated Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Syndicated Loan from such
Bank, such Bank shall apply the proceeds of its new Syndicated Loan to make such
repayment as a Refunding Loan and only an amount equal to the difference (if
any) between the amount being borrowed and the amount of such Refunding Loan
shall be made available by such Bank to the Administrative Agent as provided in
paragraph (c) of this Section, or remitted by the Borrower to the Administrative
Agent as provided in Section 2.11, as the case may be.
<PAGE>
(e) Notwithstanding anything to the contrary contained in this Agreement, no
Euro-Dollar Borrowing or Money Market Borrowing may be made if there shall have
occurred a Default or an Event of Default, which Default or Event of Default
shall not have been cured or waived, and all Refunding Loans shall be made as
Base Rate Loans (but shall bear interest at the Default Rate, if applicable).
(f) In the event that a Notice of Borrowing fails to specify whether the
Syndicated Loans comprising such Syndicated Borrowing are to be Base Rate Loans
or Euro-Dollar Loans, such Syndicated Loans shall be made as Base Rate Loans. If
the Borrower is otherwise entitled under this Agreement to repay any Syndicated
Loans maturing at the end of an Interest Period applicable thereto with the
proceeds of a new Borrowing, and the Borrower fails to repay such Syndicated
Loans using its own moneys and fails to give a Notice of Borrowing in connection
with such new Syndicated Borrowing, a new Syndicated Borrowing shall be deemed
to be made on the date such Syndicated Loans mature in an amount equal to the
principal amount of the Syndicated Loans so maturing, and the Syndicated Loans
comprising such new Syndicated Borrowing shall be Base Rate Loans.
(g) Notwithstanding anything to the contrary contained herein, there shall not
be more than 8 Euro-Dollar Borrowings and Money Market Borrowings outstanding at
any given time.
SECTION 2.02 A. MONEY MARKET LOANS. (a) In addition to making Syndicated
Borrowings, so long as the Debt Rating is BBB- or Baa3 or higher, the Borrower
may, as set forth in this Section 2.02A, request the Banks to make offers to
make Money Market Borrowings available to the Borrower. The Banks may, but shall
have no obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.02A, provided that:
(i) the number of interest rates applicable to Money Market Loans
which may be outstanding at any given time is subject to the provisions of
Section 2.02(g);
(ii) the aggregate principal amount of all Money Market Loans at any
one time outstanding shall not exceed an amount equal to 50% of the
aggregate amount of the Commitments of all of the Banks at such time;
<PAGE>
(iii) the aggregate principal amount of all Money Market Loans,
together with the aggregate principal amount of all Syndicated Loans, at
any one time outstanding shall not exceed the aggregate amount of the
Commitments of all of the Banks at such time; and
(iv) the Money Market Loans of any Bank will be deemed to be usage of
the Commitments for the purpose of calculating availability pursuant to
Section 2.01(a)(ii) and 2.02A(a)(iii), but will not reduce such Bank's
obligation to lend its pro rata share of the remaining Unused Commitment.
(b) When the Borrower wishes to request offers to make Money Market Loans,
it shall give the Administrative Agent (which shall promptly notify the Banks)
notice substantially in the form of Exhibit K (a "Money Market Quote Request")
so as to be received no later than 10:00 A.M. (Atlanta, Georgia time) at least 2
Domestic Business Days prior to the date of the Money Market Borrowing proposed
therein (or such other time and date as the Borrower and the Administrative
Agent, with the consent of the Required Banks, may agree), specifying:
(i) the proposed date of such Money Market Borrowing, which shall be a
Euro-Dollar Business Day (the "Money Market Borrowing Date");
(ii) the maturity date (or dates) (each a "Stated Maturity Date") for
repayment of each Money Market Loan to be made as part of such Money Market
Borrowing (which Stated Maturity Date shall be that date occurring not less than
7 days but not more than 180 days from the date of such Money Market Borrowing);
provided that the Stated Maturity Date for any Money Market Loan may not extend
beyond the Termination Date (as in effect on the date of such Money Market Quote
Request); and
(iii) the aggregate amount of principal to be requested by the Borrower as
a result of such Money Market Borrowing, which shall be at least $3,000,000 (and
in larger integral multiples of $1,000,000) but shall not cause the limits
specified in Section 2.02A(a) to be violated.
<PAGE>
The Borrower may request offers to make Money Market Loans having up to 3
different Stated Maturity Dates in a single Money Market Quote Request; provided
that the request for each separate Stated Maturity Date shall be deemed to be a
separate Money Market Quote Request for a separate Money Market Borrowing.
Except as otherwise provided in the immediately preceding sentence, after the
first Money Market Quote Request has been given hereunder, no Money Market Quote
Request shall be given until at least 5 Domestic Business Days after all prior
Money Market Quote Requests have been fully processed by the Administrative
Agent, the Banks and the Borrower pursuant to this Section 2.02A.
(c) (i) Each Bank may, but shall have no obligation to, submit a response
containing an offer to make a Money Market Loan substantially in the form of
EXHIBIT L (a "Money Market Quote") in response to any Money Market Quote
Request; provided that, if the Borrower's request under Section 2.02A(b)
specified more than 1 Stated Maturity Date, such Bank may, but shall have no
obligation to, make a single submission containing a separate offer for each
such Stated Maturity Date and each such separate offer shall be deemed to be a
separate Money Market Quote. Each Money Market Quote must be submitted to the
Administrative Agent not later than 10:00 A.M. (Atlanta, Georgia time) on the
Money Market Borrowing Date; provided that any Money Market Quote submitted by
Wachovia may be submitted, and may only be submitted, if Wachovia notifies the
Borrower of the terms of the offer contained therein not later than 9:45 A.M.
(Atlanta, Georgia time) on the Money Market Borrowing Date (or 15 minutes prior
to the time that the other Banks are required to have submitted their respective
Money Market Quotes). Subject to Section 5.01, any Money Market Quote so made
shall be irrevocable except with the written consent of the Administrative Agent
given on the instructions of the Borrower.
(ii) Each Money Market Quote shall specify:
(A) the proposed Money Market Borrowing Date and the Stated Maturity Date
therefor;
(B) the principal amounts of the Money Market Loan which the quoting Bank
is willing to make for the applicable Money Market Quote, which principal
amounts (x) may be greater than or less than the Commitment of the quoting Bank,
(y) shall be at least $3,000,000 or a larger integral multiple of $500,000 and
(z) may not exceed the principal amount of the Money Market Borrowing for which
offers were requested;
<PAGE>
(C) the rate of interest per annum (rounded upwards, if necessary, to the
nearest 1/100th of 1%) offered for each such Money Market Loan (such amounts
being hereinafter referred to as the "Money Market Rate"); and
(D) the identity of the quoting Bank.
Unless otherwise agreed by the Administrative Agent and the Borrower, no
Money Market Quote shall contain qualifying, conditional or similar language or
propose terms other than or in addition to those set forth in the applicable
Money Market Quote Request (other than setting forth the principal amounts of
the Money Market Loan which the quoting Bank is willing to make for the
applicable Interest Period) and, in particular, no Money Market Quote may be
conditioned upon acceptance by the Borrower of all (or some specified minimum)
of the principal amount of the Money Market Loan for which such Money Market
Quote is being made.
(d) The Administrative Agent shall as promptly as practicable after the
Money Market Quote is submitted (but in any event not later than 10:30 A.M.
(Atlanta, Georgia time)) on the Money Market Borrowing Date, notify the Borrower
of the terms (i) of any Money Market Quote submitted by a Bank that is in
accordance with Section 2.02A(c) and (ii) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Administrative
Agent unless such subsequent Money Market Quote is submitted solely to correct a
manifest error in such former Money Market Quote. The Administrative Agent's
notice to the Borrower shall specify (A) the principal amounts of the Money
Market Borrowing for which offers have been received and (B) the respective
principal amounts and Money Market Rates so offered by each Bank (identifying
the Bank that made each Money Market Quote).
(e) Not later than 11:00 A.M. (Atlanta, Georgia time) on the Money Market
Borrowing Date, the Borrower shall notify the Administrative Agent of its
acceptance or nonacceptance of the offers so notified to it pursuant to Section
<PAGE>
2.02A(d) and the Administrative Agent shall promptly notify each Bank which
submitted an offer. In the case of acceptance, such notice shall specify the
aggregate principal amount of offers (for each Stated Maturity Date) that are
accepted. The Borrower may accept any Money Market Quote in whole or in part;
provided that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request;
(ii) the aggregate principal amount of each Money Market Loan
comprising a Money Market Borrowing shall be at least $3,000,000 (and in
larger integral multiples of $1,000,000) but shall not cause the limits
specified in Section 2.02A(a) to be violated;
(iii) acceptance of offers may only be made in ascending order of
Money Market Rates; and
(iv) the Borrower may not accept any offer where the Administrative
Agent has advised the Borrower that such offer fails to comply with Section
2.02A(c)(ii) or otherwise fails to comply with the requirements of this
Agreement (including without limitation, Section 2.02A(a)).
If offers are made by 2 or more Banks with the same Money Market Rates for
a greater aggregate principal amount than the amount in respect of which offers
are accepted for the related Stated Maturity Date, the principal amount of Money
Market Loans in respect of which such offers are accepted shall be allocated by
the Borrower among such Banks as nearly as possible in proportion to the
aggregate principal amount of such offers. Determinations by the Borrower of the
amounts of Money Market Loans shall be conclusive in the absence of manifest
error.
(f) Any Bank whose offer to make any Money Market Loan has been accepted
shall, not later than 12:00 P.M. (Atlanta, Georgia time) on the Money Market
Borrowing Date, make the amount of such Money Market Loan allocated to it
available to the Administrative Agent at its address referred to in Section 8.01
in immediately available funds. The amount so received by the Administrative
Agent shall, subject to the terms and conditions of this Agreement, be made
available to the Borrower on such date by depositing the same, in immediately
available funds, not later than 2:00 P.M. (Atlanta, Georgia time), in an account
of such Borrower maintained with Wachovia.
<PAGE>
(g) After any Money Market Loan has been funded, the Administrative Agent
shall notify the Banks of the aggregate principal amount of the Money Market
Quotes received and the highest and lowest rates included in such Money Market
Quotes.
SECTION 2.03. NOTES. (a) The Syndicated Loans of each Bank shall be
evidenced by a single Syndicated Loan Note payable to the order of such Bank for
the account of its Lending Office in an amount equal to the original principal
amount of such Bank's Commitment.
(b) The Money Market Loans made by any Bank to the Borrower shall be
evidenced by a single Money Market Loan Note payable to the order of such Bank
for the account of its Lending Office in an amount equal to 50% of the original
principal amount of the aggregate Commitments.
(c) Upon receipt of each Bank's Notes pursuant to Section 3.01, the
Administrative Agent shall deliver such Notes to such Bank. Each Bank shall
record, and prior to any transfer of its Notes shall endorse on the schedules
forming a part thereof appropriate notations to evidence, the date, amount and
maturity of, and effective interest rate for, each Loan made by it, the date and
amount of each payment of principal made by the Borrower with respect thereto,
and such schedules of each such Bank's Notes shall constitute rebuttable
presumptive evidence of the respective principal amounts owing and unpaid on
such Bank's Notes; provided that the failure of any Bank to make, or any error
in making, any such recordation or endorsement shall not affect the obligation
of the Borrower hereunder or under the Notes or the ability of any Bank to
assign its Notes. Each Bank is hereby irrevocably authorized by the Borrower so
to endorse its Notes and to attach to and make a part of any Note a continuation
of any such schedule as and when required.
(d) In the event of loss, theft, destruction, total or partial
obliteration, mutilation or inappropriate cancellation of a Note, the Borrower
will execute and deliver, in lieu thereof, a replacement Note identical in form
and substance to such Note and dated as of the date of such Note.
<PAGE>
SECTION 2.04. MATURITY OF LOANS. (a) Each Loan included in any Borrowing
shall mature, and the principal amount thereof and interest thereon shall be due
and payable, on the last day of the Interest Period applicable to such
Borrowing.
(b) Notwithstanding the foregoing, the outstanding principal amount of the
Loans, if any, together with all accrued but unpaid interest thereon, if any,
shall be due and payable on May 13, 2001, unless the Termination Date is
otherwise extended by the Banks, in their sole and absolute discretion. Upon the
written request of the Borrower, which request shall be delivered to the Agent
at least 90 days prior to each Extension Date (as such term is hereinafter
defined), the Banks shall have the option (without any obligation whatsoever so
to do) of extending the then current Termination Date for additional one-year
periods from the then current Termination Date on but not before each of May 13,
1999 and May 13, 2000 (each, an "Extension Date"), but in no event shall the
Commitment of any Bank or any Loan hereunder be outstanding for a period greater
than three (3) years. Notwithstanding any request by the Borrower as described
in the foregoing sentence, in the event that a Bank chooses, in its sole and
absolute discretion, not to extend the Termination Date for such an additional
one-year period, notice shall be given by such Bank to the Borrower and the
Agent not more than 60 days but not less than 45 days prior to the relevant
Extension Date; provided, that the Termination Date shall not be extended with
respect to any of the Banks unless the Required Banks are willing to extend the
Termination Date and either (x) the remaining Banks shall elect to purchase
ratable assignments (without any obligation so to do) from such terminating Bank
(in the form of an Assignment and Acceptance) in accordance with their
respective percentage of the remaining aggregate Commitments; provided, that,
such Banks shall be provided such opportunity (which opportunity shall allow
such Banks at least 30 days in which to make a decision) prior to the Borrower
finding another bank pursuant to the immediately succeeding clause (y); and,
provided, further, that, should any of the remaining Banks elect not to purchase
such an assignment, then, such other remaining Banks shall be entitled to
purchase an assignment from any terminating Bank which includes the ratable
interest that was otherwise available to such non-purchasing remaining Bank or
Banks, as the case may be, or (y) the Borrower shall find another bank,
acceptable to the Agent, willing to accept an assignment from such terminating
<PAGE>
Bank (in the form of an Assignment and Acceptance) or (z) the Borrower shall
reduce the aggregate Commitments in an amount equal to the Commitment of any
such terminating Bank and pay to the terminating Bank all principal, interest,
fees and other amounts then payable to it hereunder and under such terminating
Bank's Notes. Notwithstanding the foregoing, if the Termination Date is not
extended for an additional one year period on each Extension Date, there shall
be no further Extension Dates or extensions of the Termination Date. If the
Termination Date is extended for an additional one year period on each Extension
Date, the Borrower shall pay to the Agent, for the ratable account of the
remaining Banks, an extension fee in an amount equal to 0.1% of the aggregate
Commitments in effect on the relevant Extension Date, which fee shall be payable
on such Extension Date.
SECTION 2.05. INTEREST RATES. (a) "Applicable Margin" means (i) for the
period commencing on the Closing Date to and including the first Performance
Pricing Determination Date, (x) for any Base Rate Loan, (0.25)%, and (y) for any
Euro-Dollar Loan, 0.80%; and (ii) from and after the first Performance Pricing
Determination Date, (x) for any Base Rate Loan, (0.25)% and (y) for each
Euro-Dollar Loan, the percentage determined on each Performance Pricing
Determination Date by reference to the table set forth below as to such type of
Loan and the Debt Rating for the quarterly or annual period ending immediately
prior to such Performance Pricing Determination Date; provided, that (i) if
there is no Debt Rating, the Applicable Margin for Euro-Dollar Loans shall be
based upon Level IV of the table below, and (ii) for Euro-Dollar Loans in effect
under the Original Agreement on the Closing Date, the Applicable Margin in
effect under the Original Agreement shall continue to apply thereto for the
remainder of the Interest Period with respect thereto.
================= =================== ============ ============ ==============
Level I Level II Level III Level IV
- ----------------- ------------------- ------------ ------------ --------------
Debt Rating Equal to or greater BBB BBB- Less than BBB-
than BBB+
or or or or
Equal to or greater
than Baa1 Baa2 Baa3 Less than Baa3
- ----------------- ------------------- ------------ ------------ --------------
Applicable Margin 0.675 0.80 0.95 1.15
================= =================== ============ ============ ==============
<PAGE>
In determining the amounts to be paid by the Borrower pursuant to Sections
2.05(b), and 2.06(a), the Borrower and the Banks shall refer to the Borrower's
Debt Rating from time to time. For purposes hereof, "Performance Pricing
Determination Date" shall mean each date on which the Debt Rating changes. Each
change in interest and fees as a result of a change in Debt Rating shall be
effective only for Loans (including Refunding Loans) which are made on or after
the relevant Performance Pricing Determination Date. All determinations
hereunder shall be made by the Administrative Agent unless the Required Banks or
the Borrower shall object to any such determination. The Borrower shall promptly
notify the Administrative Agent of any change in the Debt Rating.
(b) Each Base Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Loan is made until it becomes
due, at a rate per annum equal to the Base Rate for such day less the Applicable
Margin. Such interest shall be payable for each Interest Period on the last day
thereof. Any overdue principal of and, to the extent permitted by applicable
law, overdue interest on any Base Rate Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate per annum
equal to the sum of the Applicable Margin plus the applicable Adjusted London
Interbank Offered Rate for such Interest Period. Such interest shall be payable
for each Interest Period on the last day thereof and, if such Interest Period is
longer than 1 month, at intervals of 1 month after the first day thereof. Any
overdue principal of and, to the extent permitted by law, overdue interest on
any Euro-Dollar Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the Default Rate.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upwards,
if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable
London Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the
Euro-Dollar Reserve Percentage.
<PAGE>
The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan
means for the Interest Period of such Euro-Dollar Loan, the rate per annum
determined on the basis of the offered rate for deposits in Dollars of amounts
equal or comparable to the principal amount of such Euro-Dollar Loan offered for
a term comparable to such Interest Period, which rates appear on Telerate Page
3750 effective as of 11:00 A.M., London time, 2 Euro-Dollar Business Days prior
to the first day of such Interest Period, provided that if no such offered rates
appear on such page, the "London Interbank Offered Rate" for such Interest
Period will be the arithmetic average (rounded upward, if necessary, to the next
higher 1/100th of 1%) of rates quoted by not less than 2 major banks in New York
City, selected by the Administrative Agent, at approximately 10:00 A.M., New
York City time, 2 Euro-Dollar Business Days prior to the first day of such
Interest Period, for deposits in Dollars offered by leading European banks for a
period comparable to such Interest Period in an amount equal or comparable to
the principal amount of such Euro-Dollar Loan.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered Rate
shall be adjusted automatically on and as of the effective date of any change in
the Euro-Dollar Reserve Percentage.
(d) The Administrative Agent shall determine each interest rate applicable
to the Loans hereunder. The Agent shall give prompt notice to the Borrower and
the Banks by telecopier of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(e) After the occurrence and during the continuance of an Event of Default,
the principal amount of the Loans (and, to the extent permitted by applicable
law, all accrued interest thereon) may, at the election of the Required Banks,
bear interest at the Default Rate.
<PAGE>
(f) Each Money Market Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Money Market Loan is made until
it becomes due, at a rate per annum equal to the applicable Money Market Rate
set forth in the relevant Money Market Quote. Such interest shall be payable on
the Stated Maturity Date thereof, and, if the Stated Maturity Date occurs more
than 90 days after the date of the relevant Money Market Loan, at intervals of
90 days after the first day thereof. Any overdue principal of and, to the extent
permitted by law, overdue interest on any Money Market Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate.
SECTION 2.06. FEES. (a) The Borrower shall pay to the Administrative Agent,
for the ratable account of each Bank, a facility fee (the "Facility Fee") on the
maximum amount of the aggregate Commitments in effect for any relevant period,
irrespective of usage, calculated in the manner provided in Section 2.06(a)(ii),
at a rate per annum equal to (i) for the period commencing on the Closing Date
to and including the first Performance Pricing Determination Date, 0.15%, and
(ii) from and after the first Performance Pricing Determination Date, the
percentage determined on each Performance Pricing Determination Date by
reference to the table set forth below and the Debt Rating for the quarterly or
annual period ending immediately prior to such Performance Pricing Determination
Date; provided, that if there is no Debt Rating, the Facility Fee shall be based
upon Level IV of the table below. The Facility Fee shall accrue at all times
from and including the Closing Date to but excluding the Termination Date and
shall be payable, in arrears, on each March 31, June 30, September 30 and
December 31 and on the Termination Date.
================= ================== ============= ============ ==============
Level I Level II Level III Level IV
- ----------------- ------------------ ------------- ------------ --------------
Debt Rating Equal to or greater BBB BBB- Less than BBB-
than BBB+
or or or or
Equal to or greater
than Baa1 Baa2 Baa3 Less than Baa3
- ----------------- ------------------- ------------ ------------ --------------
Facility Fee 0.125 0.15 0.15 0.15
================= =================== ============ ============ ==============
(b) The Borrower shall pay to the Administrative Agent, for the account and
sole benefit of the Administrative Agent, such fees and other amounts at such
times as set forth in the Administrative Agent's Letter Agreement.
SECTION 2.07. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. The
Borrower may, upon at least 3 Domestic Business Days' notice to the
Administrative Agent, terminate at any time, or proportionately reduce the
Unused Commitments from time to time by an aggregate amount of at least
$5,000,000 or any larger integral multiple of $1,000,000. If the Commitments are
terminated in their entirety, all accrued fees (as provided under Section 2.06)
shall be due and payable on the effective date of such termination.
SECTION 2.08. MANDATORY REDUCTION AND TERMINATION OF COMMITMENTS. The
Commitments shall terminate on the Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable on
such date. In the event of a Change in Control, the Administrative Agent (acting
at the direction of the Required Banks) may terminate the Commitments on a date
specified in a notice to the Borrower, which date (i) must be at least 3
Domestic Business Days following the date of such notice, and (ii) shall
constitute the Termination Date for all purposes hereunder.
SECTION 2.09. OPTIONAL PREPAYMENTS. (a) The Borrower may, upon at least 2
Domestic Business Days' notice to the Administrative Agent, prepay any Fixed
Rate Borrowing in whole at any time, or from time to time in part in amounts
aggregating at least $3,000,000 or any larger integral multiple of $500,000, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment, plus the amount of compensation determined to be due
pursuant to Section 8.05, if such prepayment is not made on the last of an
Interest Period. Each such optional prepayment shall be applied to prepay
ratably the Fixed Rate Loans of the several Banks included in such Fixed Rate
Borrowing.
<PAGE>
(b) The Borrower may, upon at least 1 Domestic Business Days' notice to the
Administrative Agent, prepay any Base Rate Borrowing in whole at any time, or
from time to time in part in amounts aggregating at least $ 3,000,000 or any
larger integral multiple of $500,000, by paying the principal amount to be
prepaid together with accrued interest thereon to the date of prepayment. Each
such optional prepayment shall be applied to prepay ratably the Base Rate Loans
of the several Banks included in such Base Rate Borrowing.
(c) Upon receipt of a notice of prepayment pursuant to this Section 2.09,
the Administrative Agent shall promptly notify each Bank of the contents thereof
and of such Bank's ratable share of such prepayment and such notice, once
received by the Administrative Agent, shall not thereafter be revocable by the
Borrower.
SECTION 2.10. MANDATORY PREPAYMENTS. (a) On each date on which the
Commitments are reduced pursuant to Section 2.07, the Borrower shall repay or
prepay such principal amount of the outstanding Loans, if any (together with
interest accrued thereon and any amount required to be paid pursuant to Section
8.05(a)), as may be necessary so that after such payment the aggregate unpaid
principal amount of the Loans does not exceed the aggregate amount of the
Commitments as then reduced. On the Termination Date, the Borrower shall make
the payments required to be made pursuant to Section 2.08.
(b) On each date on which the aggregate outstanding principal amount of all
Syndicated Loans and Money Market Loans exceeds the lesser of (A) the aggregate
amount of the Commitments and (B) the Borrowing Base (the "Excess"), the
Borrower shall repay or prepay such principal amount of the outstanding Loans,
if any (together with interest accrued thereon and any amount due under Section
8.05(a)), by the amount of the Excess.
(c) Each such payment or prepayment shall be applied ratably to the Loans
of the Banks outstanding on the date of payment or prepayment in the following
order of priority:(i) first, to Base Rate Loans; (ii) secondly, to Euro-Dollar
Loans; and (iii) lastly, to Money Market Loans.
<PAGE>
SECTION 2.11. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 1:00 P.M. (Atlanta, Georgia time) on the date when
due, in Federal or other funds immediately available in Atlanta, Georgia, to the
Administrative Agent at its address referred to in Section 9.01. The
Administrative Agent will distribute to each Bank its ratable share of each such
payment received by the Administrative Agent for the account of the Banks, such
payment to be distributed by the Administrative Agent (x) by 2:00 P.M. on the
date of receipt by the Administrative Agent, provided that such payment was
received by the Administrative Agent by 1:00 P.M. (Atlanta, Georgia time), and
(y) by 2:00 P.M. (Atlanta, Georgia time) on the date following the date of
receipt by the Administrative Agent, if such payment was received by the
Administrative Agent after 1:00 P.M. (Atlanta, Georgia time). If the
Administrative Agent shall fail to make such distribution within the time
required by the immediately preceding sentence, such distribution shall be made
together with interest thereon, for each day during the period from the date
such distribution should have been so made until the date such distribution
actually is made, at a rate per annum equal to the Federal Funds Rate.
(b) Whenever any payment of principal of, or interest on, the Base Rate
Loans or Money Market Loans or of fees hereunder shall be due on a day which is
not a Domestic Business Day, the date for payment thereof shall be extended to
the next succeeding Domestic Business Day. Whenever any payment of principal of
or interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day.
(c) All payments of principal, interest and fees and all other amounts to
be made by the Borrower pursuant to this Agreement with respect to any Loan or
fee relating thereto shall be paid without deduction for, and free from, any
tax, imposts, levies, duties, deductions, or withholdings of any nature now or
at anytime hereafter imposed by any governmental authority or by any taxing
authority thereof or therein excluding in the case of each Bank, taxes imposed
on or measured by its net income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank is organized or any political
<PAGE>
subdivision thereof and, in the case of each Bank, taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction of such Bank's applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, imposts, levies, duties, deductions or withholdings of any nature being
"Taxes"). In the event that the Borrower is required by applicable law to make
any such withholding or deduction of Taxes with respect to any Loan or fee or
other amount, the Borrower shall pay such deduction or withholding to the
applicable taxing authority, shall promptly furnish to any Bank in respect of
which such deduction or withholding is made all receipts and other documents
evidencing such payment and shall pay to such Bank additional amounts as may be
necessary in order that the amount received by such Bank after the required
withholding or other payment shall equal the amount such Bank would have
received had no such withholding or other payment been made.
Each Bank which is not organized under the laws of the United States or any
state thereof agrees, as soon as practicable after receipt by it of a request by
the Borrower to do so, to file all appropriate forms and take other appropriate
action to obtain a certificate or other appropriate document from the
appropriate governmental authority in the jurisdiction imposing the relevant
Taxes, establishing that it is entitled to receive payments of principal and
interest under this Agreement and the Notes without deduction and free from
withholding of any Taxes imposed by such jurisdiction; provided that if it is
unable, for any reason, to establish such exemption, or to file such forms and,
in any event, during such period of time as such request for exemption is
pending, the Borrower shall nonetheless remain obligated under the terms of the
immediately preceding paragraph.
In the event any Bank receives a refund of any Taxes paid by the Borrower
pursuant to this Section 2.11(c), it will pay to the Borrower the amount of such
refund promptly upon receipt thereof; provided that if at any time thereafter it
is required to return such refund, the Borrower shall promptly repay to it the
amount of such refund.
<PAGE>
Without prejudice to the survival of any other agreement of the Borrower
hereunder, the agreements and obligations of the Borrower and the Banks
contained in this Section 2.11(c) shall be applicable with respect to any
Participant, Assignee or other Transferee, and any calculations required by such
provisions (i) shall be made based upon the circumstances of such Participant,
Assignee or other Transferee, and (ii) constitute a continuing agreement and
shall survive the termination of this Agreement and the payment in full or
cancellation of the Notes.
SECTION 2.12. COMPUTATION OF INTEREST AND FEES. Interest on Base Rate Loans
and Money Market Loans shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed (including the first day but
excluding the last day). Interest on Euro-Dollar Loans shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed,
calculated as to each Interest Period from and including the first day thereof
to but excluding the last day thereof. Commitment fees and any other fees
payable hereunder shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding the
last day).
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. CONDITIONS TO FIRST BORROWING. The obligation of each Bank to
make a Syndicated Loan on the occasion of the first Borrowing is subject to the
satisfaction of the conditions set forth in Section 3.02 and receipt by the
Administrative Agent of the following (as to the documents described in
paragraphs (a), (c),(d) and (e) below, in sufficient number of counterparts for
delivery of a counterpart to each Bank and retention of one counterpart by the
Administrative Agent):
(a) from each of the parties hereto of either (i) a duly executed
counterpart of this Agreement signed by such party or (ii) a facsimile
transmission of such executed counterpart, with the original to be sent to the
Administrative Agent by overnight courier);
(b) a duly executed Syndicated Loan Note and Money Market Loan Note for the
account of each Bank complying with the provisions of Section 2.03 and a duly
executed Guaranty and Contribution Agreement, and from each Bank which holds any
of the Original Notes, such Original Notes;
<PAGE>
(c) an opinion letter (i) (together with any opinions of local counsel
relied on therein) of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., counsel for
the Borrower, dated as of the Closing Date, in form and substance satisfactory
to the Administrative Agent in its reasonable discretion, the forms attached
hereto as Exhibit B and covering such additional matters relating to the
transactions contemplated hereby as the Administrative Agent or any Bank may
reasonably request;
(d) an opinion of Jones, Day, Reavis & Pogue, special counsel for the
Administrative Agent, dated as of the Closing Date, substantially in the form of
Exhibit C and covering such additional matters relating to the transactions
contemplated hereby as the Administrative Agent may reasonably request;
(e) a certificate (the "Closing Certificate") substantially in the form of
Exhibit G), dated as of the Closing Date, signed by an Executive Officer (other
than the Secretary), to the effect that (i) no Default has occurred and is
continuing on the date of the first Borrowing and (ii) the representations and
warranties of the Borrower contained in Article IV are true on and as of the
date of the first Borrowing hereunder;
(f) all documents which the Administrative Agent or any Bank may reasonably
request relating to the existence of the Borrower, the corporate authority for
and the validity of this Agreement, the Notes and the Guaranty, and any other
matters relevant hereto, all in form and substance satisfactory to the
Administrative Agent, including, without limitation, certificates of incumbency
of the General Partner and of each Guarantor, signed by the Secretary or an
Assistant Secretary of the General Partner and each Guarantor, in form and
substance satisfactory to the Administrative Agent (the "Officer's
Certificate"), certifying as to the names, true signatures and incumbency of the
officer or officers of the General Partner and Guarantor authorized to execute
and deliver the Loan Documents on behalf of the Borrower or Guarantor, and
certified copies of the following items:
<PAGE>
(i) for the Borrower (1) its Certificate of Limited Partnership and
all amendments thereto, issued by the Secretary of State of Delaware; (2)
its Partnership Agreement and all amendments thereto, (3) a certificate of
Existence and Good Standing issued by the Secretary of State of Delaware,
(4) its Application for Registration as a Foreign Limited Partnership and
all amendments thereto, filed in the office of the Secretary of State of
Texas and (5) a Certificate of Existence issued by the Secretary of State
of Texas;
(ii) for the General Partner, (1) its Certificate of Incorporation and
all amendments thereto, issued by the Secretary of State of Texas, (2) its
Bylaws and all amendments thereto, (3) a Certificate of Existence issued by
the Secretary of State of Texas, (4) a Certificate of Account Status issued
by the Comptroller of Public Accounts for the State of Texas, and (5)
resolutions of the Board of Directors pertaining to the execution and
delivery by (x) the Borrower of the Credit Agreement, the Notes, the
Contribution Agreement and the other Loan Documents to which the Borrower
is a party and (y) the General Partner of the Guaranty and the Contribution
Agreement;
(iii) for GBP, (1) its Declaration of Trust and all amendments
thereto, (2) its Bylaws and all amendments thereto, and (3) resolutions of
the Board of Trustees pertaining to the execution and delivery of the
Guaranty and the Contribution Agreement; and
(iv) for Gables-Tennessee Properties (1) its Partnership Agreement and
all amendments thereto, and (2) resolutions of the Board of Directors of
the General Partner (as general partner of Gables-Tennessee Properties, or
as general partner of the Borrower, which is general partner of
Gables-Tennessee Properties) pertaining to the execution and delivery by
Gables-Tennessee Properties of the Guaranty and the Contribution Agreement.
(g) a Notice of Borrowing or notification pursuant to Section 2.02A(e)of
acceptance of one or more Money Market Quotes, as the case may be;
(h) receipt of the initial Borrowing Base Certificate, showing the
Borrowing Base as of the Closing Date; and
<PAGE>
(i) receipt of the fees required to be paid on the Closing Date pursuant to
Sections 2.06.
The initial Borrowing hereunder shall include Loans in an amount which is
sufficient to pay in full all existing principal of and accrued and unpaid
interest of all Syndicated Loans outstanding under the Original Agreement on the
Closing Date, and all amounts payable pursuant to Section 7.05 with respect
thereto, and to the extent that any Bank has any Syndicated Loans to be so
repaid, its funding of such initial Loans shall be made pursuant to Section
2.02(d). All Money Market Loans of any Bank which outstanding under the Original
Agreement on the Closing Date shall be deemed to be evidenced by the new Money
Market Loan Note issued to such Bank pursuant to Section 3.01(b).
SECTION 3.02. CONDITIONS TO ALL BORROWINGS. The obligation of each Bank to
make a Syndicated Loan or Money Market Loan, as the case may be, on the occasion
of each Borrowing is subject to the satisfaction of the following conditions
except as expressly provided in the last sentence of this Section 3.02:
(a) receipt by the Administrative Agent of a Notice of Borrowing or
notification pursuant to Section 2.02A(e) of acceptance of one or more
Money Market Quotes, as applicable.
(b) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the Borrower
contained in Article IV of this Agreement shall be true on and as of the
date of such Borrowing; and
(d) the fact that, immediately after such Borrowing, the conditions
set forth in clauses (i) and (ii) of Section 2.01 shall have been
satisfied.
Each Syndicated Borrowing and each Money Market Borrowing hereunder shall be
deemed to be a representation and warranty by the Borrower on the date of such
Borrowing as to the truth and accuracy of the facts specified in paragraphs (b),
(c) and (d) of this Section; provided that if such Borrowing is a Syndicated
Borrowing which consists solely of a Refunding Loan, such Borrowing shall not be
deemed to be such a representation and warranty to the effect set forth in
Section 4.04(b) as to any event, act or condition having a Material Adverse
Effect which has theretofore been disclosed in writing by the Borrower to the
Banks.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower and (by incorporation by reference in the Guaranty) the
Guarantors, as expressly stated, each represent and warrant that:
SECTION 4.01. PARTNERSHIP OR CORPORATE EXISTENCE AND POWER. The Borrower is
a limited partnership duly created and validly existing under the laws of
Delaware, GBP is a trust duly created, validly existing and in good standing
under the laws of Maryland, the General Partner is a corporation duly organized,
validly existing and in good standing under the laws of Texas, and each of the
foregoing is duly qualified to transact business in every jurisdiction where, by
the nature of its business, such qualification is necessary, and has all
partnership powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where any
such failure does not have and is not reasonably expected to cause a Material
Adverse Effect.
SECTION 4.02. PARTNERSHIP OR CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. The execution, delivery and performance by the Borrower of this
Agreement, the Notes and the other Loan Documents and by the Guarantors of the
Guaranty (i) are within the Borrower's partnership powers and the Guarantor's
respective corporate powers, (ii) have been duly authorized by all necessary
partnership or corporate action, (iii) require no action by or in respect of or
filing with, any governmental body, agency or official, other than filings
required by federal or state securities laws with respect to this Agreement (iv)
do not contravene, or constitute a default under, any provision of applicable
law or regulation or of the certificate of limited partnership or partnership
agreement of the Borrower or the articles of incorporation or by-laws of any
Guarantor or of any material agreement, judgment, injunction, order, decree or
other instrument binding upon the Borrower, any Guarantor or any other
Subsidiaries, and (v) do not result in the creation or imposition of any Lien on
any asset of the Borrower, any Guarantor or any other Subsidiaries.
<PAGE>
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Borrower enforceable in accordance with its terms, and
the Notes, the Guaranty and the other Loan Documents, when executed and
delivered in accordance with this Agreement, will constitute valid and binding
obligations of the Borrower and the Guarantors parties thereto, enforceable in
accordance with their respective terms, provided that the enforceability hereof
and thereof is subject in each case to general principles of equity and to
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally.
SECTION 4.04. FINANCIAL AND PROPERTY INFORMATION. (a) The balance sheet of
GBP and the consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of December 31, 1997 and the related consolidated statements of
income, shareholders' equity and cash flows for the Fiscal Year then ended, in
the case of GBP reported on by Arthur Andersen LLP, copies of which have been
delivered to each of the Banks, and the unaudited financial statement of GBP and
consolidated financial statements of the Borrower for the interim period ended
September 30, 1997, copies of which have been delivered to each of the Banks,
fairly present, in all material respects, in conformity with GAAP, subject in
the case of quarterly statements to normal year end audit adjustments, the
consolidated financial position of GBP and the Borrower and its Consolidated
Subsidiaries, respectively, as of such dates and their consolidated results of
operations and cash flows for such periods stated.
(b) Since December 31, 1996, there has been no event, act, condition or
occurrence having a Material Adverse Effect.
(c) All material information concerning the Properties which has been
furnished to the Banks by the Borrower is true and correct in all material
respects.
SECTION 4.05. NO LITIGATION. There is no action, suit or proceeding
pending, or to the knowledge of the Executive Officers, threatened, against or
affecting the Borrower, any Guarantor or any other Subsidiaries before any court
or arbitrator or any governmental body, agency or official which has or is
reasonably expected to cause a Material Adverse Effect or which in any manner
draws into question the validity of or is reasonably expected to impair the
ability of the Borrower or any Guarantor to perform its obligations under, this
Agreement, the Notes, the Guaranty or any of the other Loan Documents.
<PAGE>
SECTION 4.06. COMPLIANCE WITH ERISA. (a) The Borrower and each member of
the Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the presently applicable provisions of ERISA and
the Code, and have not incurred any liability to the PBGC or a Plan under Title
IV of ERISA, except where any such failure does not involve an aggregate amount
in excess of $2,500,000.
(b) Neither the Borrower nor any member of the Controlled Group is or ever
has been obligated to contribute to any Multiemployer Plan.
SECTION 4.07. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. The Borrower, the
Guarantors and the other Subsidiaries are in compliance with all applicable
laws, regulations and similar requirements of governmental authorities, except
where (i) such compliance is being contested in good faith through appropriate
proceedings or (ii) any failure to comply does not have and is not reasonably
expected to cause a Material Adverse Effect. There have been filed on behalf of
the Borrower, the Guarantors and the other Subsidiaries all Federal, state and
local income, excise, property and other tax returns which are required to be
filed by them and all taxes due pursuant to such returns or pursuant to any
assessment received by or on behalf of the Borrower, the Guarantors or any other
Subsidiary have been paid, except: (A) ad valorem taxes not due and payable; and
(B) other liabilities, if (1) they are being contested in good faith and against
which the Borrower, Guarantor or Subsidiary has set up reserves in accordance
with GAAP, or (2) the aggregate amount involved is not in excess of $2,500,000.
The charges, accruals and reserves on the books of the Borrower, the Guarantors
and the other Subsidiaries in respect of taxes or other governmental charges
are, in the opinion of the Borrower and the Guarantors, adequate. United States
income tax returns of GBP for the 1994 Fiscal Year have been timely filed. GBP
has received no written communication from the Internal Revenue Service
regarding such returns.
<PAGE>
SECTION 4.08. SUBSIDIARIES. The Borrower has no Subsidiaries except for
those Subsidiaries listed on Schedule 4.08, as supplemented from time to time,
which accurately sets forth each such Subsidiary's complete name and
jurisdiction of incorporation.
SECTION 4.09. INVESTMENT COMPANY ACT. Neither the Borrower, the Guarantors
nor any other Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 4.10. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower, any
Guarantor nor any Subsidiary is a "holding company", or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
SECTION 4.11. OWNERSHIP OF PROPERTY. Each of the Borrower, the Guarantors
and the Subsidiaries has title to its properties sufficient for the conduct of
its business, except where any such failure does not have and is not reasonably
expected to cause a Material Adverse Effect.
SECTION 4.12. NO DEFAULT. Neither the Borrower, the Guarantors nor any of
the Subsidiaries is in default under or with respect to any agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound which has or is reasonably expected to cause a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
SECTION 4.13. FULL DISCLOSURE. All information heretofore furnished by the
Borrower or any Guarantor to the Administrative Agent or any Bank for purposes
of or in connection with this Agreement or any transaction contemplated hereby
is, and all such information hereafter furnished by the Borrower to the
Administrative Agent or any Bank will be, true, accurate and complete in all
material respects or based on reasonable estimates on the date as of which such
information is stated or certified. The Borrower and the Guarantors have
disclosed to the Banks in writing any and all facts which have had or are
reasonably expected to cause a Material Adverse Effect.
<PAGE>
SECTION 4.14. ENVIRONMENTAL MATTERS. (a) Neither the Borrower, the
Guarantors nor any other Subsidiary is, to the knowledge of the Executive
Officers, subject to any Environmental Liability which has had or is reasonably
expected to cause a Material Adverse Effect and neither the Borrower, the
Guarantors nor any other Subsidiary has been designated as a potentially
responsible party under CERCLA or under any state statute similar to CERCLA,
except as disclosed in writing to the Administrative Agent (and the
Administrative Agent shall promptly furnish a copy of any such disclosure to the
Banks). None of the Properties has been identified on any current or proposed
(i) National Priorities List under 40 C.F.R. 300, (ii) CERCLIS list or (iii)
any list arising from a state statute similar to CERCLA, except as disclosed in
writing to the Administrative Agent, if any such disclosures have been made.
(b) No Hazardous Materials have been permitted or are being permitted to be
used, produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed or otherwise handled at, or shipped or transported to or
from the Properties or are otherwise present at, on, in or under the Properties,
or, to the best of the knowledge of the Executive Officers, at or from any
adjacent site or facility, except for Hazardous Materials, such as cleaning
solvents, pesticides and other materials used, stored, disposed of, managed, or
otherwise handled in all material respects in compliance with all applicable
Environmental Requirements and except as disclosed in writing to the
Administrative Agent.
(c) The Borrower, each Guarantor and each of the Subsidiaries, has procured
all Environmental Authorizations necessary for the conduct of its business, and
is in compliance with all Environmental Requirements (including, to the best
knowledge of the Executive Officers, with respect to any Environmental Releases)
in connection with the operation of the Properties and the Borrower's, each
Guarantor's and each other Subsidiary's respective businesses, except where any
such failure to comply does not have and is not reasonably expected to cause a
Material Adverse Effect.
<PAGE>
SECTION 4.15. PARTNER INTERESTS AND CAPITAL STOCK. All Partner Interests
and Capital Stock, debentures, bonds, notes and all other securities of the
Borrower, each Guarantor and each of the other Subsidiaries presently issued and
outstanding are validly and properly issued in accordance with all applicable
laws, including, but not limited to, the "Blue Sky" laws of all applicable
states and the federal securities laws, except where any such failure to comply
does not and is not reasonably expected to cause a Material Adverse Effect. The
issued shares of Capital Stock of the Borrower's Wholly Owned Subsidiaries are
owned by the Borrower free and clear of any Lien or adverse claim. At least a
majority of the issued shares of non-voting Capital Stock of each of the
Borrower's other Subsidiaries is owned by the Borrower free and clear of any
Lien or adverse claim.
SECTION 4.16. MARGIN STOCK. Neither the Borrower, any Guarantor nor any of
the Subsidiaries is engaged principally, or as one of its important activities,
in the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Loan will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock, or be used for any purpose which violates, or which is inconsistent with,
the provisions of Regulation X.
SECTION 4.17. INSOLVENCY. After giving effect to the execution and delivery
of the Loan Documents and the making of the Loans under this Agreement: (i)
neither the Borrower nor any Guarantor will (x) be "insolvent," within the
meaning of such term as used in O.C.G.A. 18-2-22 or as defined in 101 of the
"Bankruptcy Code", or Section 2 of either the "UFTA" or the "UFCA", or as
defined or used in any "Other Applicable Law" (as those terms are defined
below), or (y) be unable to pay its debts generally as such debts become due
within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA
or Section 6 of the UFCA, or (z) have an unreasonably small capital to engage in
any business or transaction, whether current or contemplated, within the meaning
of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the
UFCA; and (ii) the obligations of the Borrower under the Loan Documents and with
respect to the Loans will not be rendered avoidable under any Other Applicable
Law. For purposes of this Section 4.17, "Bankruptcy Code" means Title 11 of the
United States Code, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA"
means the Uniform Fraudulent Conveyance Act, and "Other Applicable Law" means
any other applicable state law pertaining to fraudulent transfers or acts
voidable by creditors, in each case as such law may be amended from time to
time.
<PAGE>
SECTION 4.18. INSURANCE. The Borrower, each Guarantor and each of the
Subsidiaries has (either in the name of the Borrower, such Guarantor or in such
other Subsidiary's own name), with financially sound and reputable insurance
companies having an A.M. Best rating of B+ or better, insurance on all its
property in at least such amounts and against at least such risks as are usually
insured against in the same general area by companies of established repute
engaged in the same or similar business.
SECTION 4.19. REAL ESTATE INVESTMENT TRUST. GBP is qualified under the Code
as a real estate investment trust.
SECTION 4.20. MILLENNIUM COMPLIANCE. All computer systems used by the
Borrower and the Subsidiaries are capable of the following, before, during
and/or after January 2000:
(a) handling date information involving all and any dates before,
during and/or after January 1, 2000, including accepting input, providing
output and performing date calculations in whole or in part;
(b) operating, accurately without interruption on and in respect of
any and all dates before, during and/or after January 1, 2000 and without
any change in performance;
(c) responding to and processing two digit year input without creating
any ambiguity as to the century; and
(d) storing and providing date input information without creating any
ambiguity as to the century.
<PAGE>
ARTICLE V
COVENANTS
The Borrower and (by incorporation by reference in the Guaranty) the
Guarantors agree that, so long as any Bank has any Commitment hereunder or any
amount payable hereunder or under any Note remains unpaid:
SECTION 5.01. INFORMATION. GBP and the Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the end of
each Fiscal Year, a consolidated balance sheet of GBP and its Consolidated
Subsidiaries as of the end of its Fiscal Year and the related consolidated
statements of income, shareholders' equity and cash flows for such Fiscal Year,
setting forth in each case in comparative form the figures for the previous
Fiscal Year, all certified by Arthur Andersen LLP or other independent public
accountants of nationally recognized standing, with such certification to be
free of exceptions and qualifications as to the scope of the audit or as to the
going concern nature of the business;
(b) as soon as available and in any event within 45 days after the end of
each of the first 3 Fiscal Quarters of each Fiscal Year, a consolidated balance
sheet of GBP and its Consolidated Subsidiaries as of the end of such Fiscal
Quarter and the related statement of income and statement of cash flows for such
Fiscal Quarter and for the portion of the Fiscal Year ended at the end of such
Fiscal Quarter, setting forth in each case in comparative form the figures for
the corresponding Fiscal Quarter and the corresponding portion of the previous
Fiscal Year, all certified (subject to normal year-end adjustments) as to
fairness of presentation, GAAP and consistency by an Executive Officer;
(c) simultaneously with the delivery of each set of financial statements
referred to in paragraphs (a) and (b) above, a certificate, substantially in the
form of Exhibit F (a "Compliance Certificate"), of an Executive Officer (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections 5.03
through 5.09, inclusive, and Sections 5.25 and 5.27, on the date of such
financial statements and (ii) stating whether any Default exists on the date of
such certificate and, if any Default then exists, setting forth the details
thereof and the action which the Borrower is taking or proposes to take with
respect thereto;
(d) within 5 Domestic Business Days after any Executive Officer becomes
aware of the occurrence of any Default, a certificate of an Executive Officer
setting forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(e) promptly upon the mailing thereof to the holders of beneficial
ownership in GBP generally, copies of all financial statements, reports and
proxy statements so mailed;
(f) promptly upon the filing thereof, notice of the filing of all
registration statements (other than any registration statements on Form S-3 or
Form S-8 or the equivalent thereof) and annual, quarterly or monthly reports
(excluding Form 4, Statement of Changes in Beneficial Ownership, or its
equivalent, unless they reflect a Change in Control), any filing on Form 8-K,
and any filing pursuant to the Williams Act, which GBP shall have filed with the
Securities and Exchange Commission, and, upon the request of any Bank, copies of
any of the foregoing (other than the exhibits to any registration statements);
(g) if and when any member of the Controlled Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section 4043
of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii)
receives notice from the PBGC under Title IV of ERISA of an intent to terminate
or appoint a trustee to administer any Plan, a copy of such notice;
(h) within 45 Domestic Business Days after the end of each Fiscal Quarter,
a Borrowing Base Certificate as of the last day of the Fiscal Quarter just
ended; provided, however, that at the Borrower's election, Borrower may, and or
at the Administrative Agent's election on not less than 10 Domestic Business
Days notice, Borrower shall, submit a Borrowing Base Certificate to the
Administrative Agent on or before the twentieth Domestic Business Day after the
end of the first or second month in any Fiscal Quarter, as of the last day of
such month;
<PAGE>
(i) by April 1 of each year, a report as of the end of such Fiscal Year
containing the following information: (i) a schedule of all outstanding Debt,
showing for each component of Debt, the lender, the total commitment, the total
Debt outstanding, the interest rate, if fixed, or a statement that the interest
rate floats, the term, the required amortization (if any) and the security (if
any); (ii) a schedule of all interest rate protection agreements, showing for
each such agreement, the total dollar amount, the type of agreement (i.e. cap,
collar, swap, etc.) and the term thereof; and (iii) a development schedule of
the announced development pipeline, including for each announced development
project, the project name and location, the number of units, the expected
construction start date, the expected date of delivery of the first units, the
expected stabilization date, and the total anticipated cost.
(j) from time to time such additional information regarding the financial
position or business of the Borrower and its Subsidiaries as the Administrative
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Borrower and
the Guarantors will (i) keep, and cause each other Consolidated Subsidiary to
keep, proper books of record and account in which full, true and correct entries
in conformity with GAAP shall be made of all dealings and transactions in
relation to its business and activities; and (ii) permit, and cause each other
Consolidated Subsidiary to permit, representatives of any Bank at such Bank's
expense prior to the occurrence of a Default and at the Borrower's or such
Guarantor's expense after the occurrence and during the continuance of a Default
to visit and inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants. The Borrower and the Guarantors
agree to cooperate and assist in such visits and inspections, in each case at
such reasonable times, upon reasonable prior notice to the Borrower or such
Guarantor and as often as may reasonably be desired.
<PAGE>
SECTION 5.03. TOTAL SECURED DEBT. The amount of Total Secured Debt will not
at any time exceed 40% of Total Assets Value.
SECTION 5.04. RATIO OF TOTAL DEBT TO TOTAL ASSETS VALUE. The ratio of Total
Debt to Total Assets Value will not at any time exceed 0.55 to 1.00; provided,
that, solely as a result of the South Florida Acquisition, such ratio for the
Fiscal Quarter ending June 30, 1998 (but not thereafter), may exceed 0.55 to
1.0, so long as for such Fiscal Quarter it does not exceed 0.60 to 1.0.
SECTION 5.05. INTEREST COVERAGE. The ratio of (x) Consolidated Income
Available for Debt Service to (y) Consolidated Interest Expense shall at all
times exceed 2.00 to 1.0, calculated at the end of each Fiscal Quarter, based on
the Fiscal Quarter just ended and the immediately preceding three Fiscal
Quarters.
SECTION 5.06. RESTRICTED PAYMENTS. The Borrower's Restricted Payments in
any calendar year shall not exceed 95% of Consolidated Income Available for
Distribution for such period, unless (i) the Borrower must pay out an amount in
excess of 95% of Consolidated Income Available for Distribution to permit GBP to
preserve its status as a real estate investment trust under the applicable
provision of the Code, or (ii) GBP declares one or more capital gains dividends
within such calendar year (in which event the amount of additional Restricted
Payments that may be made as a result of such declaration as provided in this
clause (ii) shall not exceed the greater of (A) the income tax liability of the
Borrower's partners with respect thereto and (B) $1,500,000). In the event that
the Borrower or GBP receives a public debt rating of BBB- or better from
Standard & Poors or Baa3 or better from Moody's Investor's Service and so long
as that rating is affirmed during each year, the Borrower's Restricted Payments
in any calendar year will be limited to 100% of Consolidated Income Available
for Distribution for such calendar year with the same exceptions contained in
clauses (i) and (ii) of this Section 5.06.
<PAGE>
SECTION 5.07. LOANS OR ADVANCES. Neither the Borrower, the Guarantors nor
any other Subsidiary shall make loans or advances to any Person except: (i)
deposits required by government agencies or public utilities; (ii) loans and
advances made by Borrower or any Guarantor to any Guarantor or to Borrower;
(iii) loans or advances to directors, officers and employees in the ordinary
course of business in the aggregate outstanding at any time not exceeding
$1,000,000; (iv) loans or advances to employees in the ordinary course of
business which are secured by stock in GBP in the aggregate outstanding at any
time not exceeding $5,000,000; and (v) other loans or advances made in the
ordinary course of business in the aggregate outstanding at any time not
exceeding 5% of the book value of the total assets of the Borrower and its
Consolidated Subsidiaries, determined in accordance with GAAP minus all amounts
outstanding under clause (iii) of this Section 5.07 and minus Investments made
and permitted pursuant to Section 5.09(D); provided that after giving effect to
the making of any loans, advances or deposits permitted by clauses (i), (ii),
(iii) or (iv), the Borrower will be in full compliance with all the provisions
of this Agreement.
SECTION 5.08. PURCHASES OF STOCK BY GUARANTORS. Except for purchases or
acquisitions of shares of GBP's Capital Stock made for purposes of having such
shares available for purchase by GBP shareholders pursuant to GBP's dividend
reinvestment and share purchase program known as "The Share Builder Plan", as
amended as of the Closing Date and, subject to the approval of the Required
Banks (not to be unreasonably withheld), as it may thereafter be amended, the
Guarantors shall not purchase or acquire any shares of GBP's Capital Stock
during any 12 month period in excess of 10% of all GBP's Capital Stock
outstanding on the first day of such period.
SECTION 5.09. INVESTMENTS. Neither the Borrower nor the Guarantors shall
make Investments in any Person except: (A) Investments in (i) direct obligations
of the United States Government, (ii) certificates of deposit issued by a
commercial bank whose credit is satisfactory to the Administrative Agent, (iii)
commercial paper rated A1 or the equivalent thereof by Standard & Poor's
Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc.
and in either case maturing within 9 months after the date of acquisition, (iv)
tender bonds the payment of the principal of and interest on which is fully
supported by a letter of credit issued by a United States bank whose long-term
certificates of deposit are rated at least AA or the equivalent thereof by
<PAGE>
Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's
Investors Service, Inc., (v) insured money market Investments and/or (vi)
Investments in debt or equity securities rated at least BBB+ or the equivalent
thereof by Standard & Poor's Corporation or at least Baa1 or the equivalent
thereof by Moody's Investors Service not exceeding an aggregate amount
outstanding at any time of $25,000,000; (B) Investments permitted by clauses
(i), (ii) and (iii) of Section 5.07 or by Section 5.08; (C) Investments in
Significant Subsidiaries; (D) the South Florida Acquisition; and (E) other
Investments not exceeding an aggregate amount outstanding at any time 10% of the
book value of the total assets of the Borrower and its Consolidated
Subsidiaries, determined in accordance with GAAP, less loans and advances
outstanding and permitted by clause (iv) of Section 5.07.
SECTION 5.10. DISSOLUTION. Neither the Borrower, the Guarantors nor any of
the other Subsidiaries shall suffer or permit dissolution or liquidation either
in whole or in part or redeem or retire any shares of its own stock or that of
any Subsidiary, except to the extent permitted by Section 5.11 and except for
purchases by GBP of its own Capital Stock to the extent permitted by Section
5.08, and subject to the rights of limited partners of the Borrower to convert
or exchange their Partner Interests in the Borrower to stock in GBP.
SECTION 5.11. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Borrower and
the Guarantors will not, nor will the Borrower permit any other Subsidiary to,
consolidate or merge with or into, or sell, lease or otherwise transfer all or
any substantial part of its assets to, any other Person, or discontinue or
eliminate any business line or segment, provided that
(a) the Borrower, any Guarantor and any other Subsidiary may merge
with another Person if (i) such Person was organized under the laws of the
United States of America or one of its states, (ii) the Borrower or such
Guarantor or other Subsidiary is the corporation surviving such merger and
(iii) immediately after giving effect to such merger, no Default shall have
occurred and be continuing,
<PAGE>
(b) any Guarantor may merge with or transfer assets to another
Guarantor or the Borrower (with the Borrower as the survivor of any such
merger) and any other Subsidiary may merge with or transfer assets to a
Guarantor, another Subsidiary, or the Borrower (with the Borrower as the
survivor of any such merger), and
(c) the foregoing limitation on the sale, lease or other transfer of
assets and on the discontinuation or elimination of a business line or
segment shall not prohibit, during any Fiscal Quarter, a transfer of assets
or the discontinuance or elimination of a business line or segment (in a
single transaction or in a series of related transactions) unless the
aggregate assets to be so transferred or utilized in a business line or
segment to be so discontinued, when combined with all other assets
transferred, and all other assets utilized in all other business lines or
segments discontinued, during such Fiscal Quarter and the immediately
preceding 3 Fiscal Quarters, either (x) constituted more than 5% of
Consolidated Total Assets at the end of the Fiscal Quarter immediately
preceding such Fiscal Quarter, or (y) contributed more than 5% of
Consolidated Income Available for Debt Service during the 4 Fiscal Quarters
immediately preceding such Fiscal Quarter.
In the case of any Subsidiary which transfers substantially all of its
assets pursuant to clause (c) of the preceding sentence, and in the case of any
Subsidiary the stock of which is being sold and with respect to which clause (c)
would have been satisfied if the transaction had been a sale of assets of such
Subsidiary, such Subsidiary may dissolve and, if it is a Guarantor, such
Subsidiaries shall be entitled to obtain from the Administrative Agent a written
release from the Guaranty, provided that it can demonstrate to the reasonable
satisfaction of the Administrative Agent that (A) it was not a Significant
Subsidiary immediately prior to such transfer of assets, and (B) it has repaid
in full all Debt owed to the Borrower or any other Guarantor which was incurred
after the Closing Date (or such Debt has been assumed by the Borrower or a
Significant Subsidiary), and upon obtaining such written release, it shall no
longer be a Guarantor for any purpose hereunder.
SECTION 5.12. USE OF PROCEEDS. The proceeds of the Loans may be used to
provide a line of credit for construction and acquisition financing and for
general corporate and partnership purposes of the Borrower and the Guarantors.
No portion of the proceeds of the Loans will be used by the Borrower or any
Guarantor (i) in connection with, whether directly or indirectly, any tender
offer for, or other acquisition of, stock of any corporation with a view towards
obtaining control of such other corporation, unless such tender offer or other
acquisition is to be made on a negotiated basis with the approval of the Board
of Directors of the Person to be acquired or (ii) for any purpose in violation
of any applicable law or regulation.
SECTION 5.13. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. The Borrower and
Guarantors will, and will cause each of the other Subsidiaries and each member
of the Controlled Group to, comply with applicable laws (including but not
limited to ERISA), regulations and similar requirements of governmental
authorities (including but not limited to PBGC), except where (i) the necessity
of such compliance is being contested in good faith through appropriate
proceedings, or (ii) any failure to comply which does not have and is not
reasonably expected to cause a Material Adverse Effect. The Borrower and
Guarantors will, and will cause each of the other Subsidiaries to, pay promptly
when due all taxes, assessments, governmental charges, claims for labor,
supplies, rent and other obligations which, if unpaid, might become a Lien
against the Property of the Borrower, any Guarantor or any other Subsidiary,
except (A) liabilities being contested in good faith and against which, if
requested by the Administrative Agent, the Borrower, Guarantor or Subsidiary
will set up reserves in accordance with GAAP, and (B) liabilities in an
aggregate amount for all Properties not in excess of $1,000,000.
SECTION 5.14. INSURANCE. The Borrower and the Guarantors will maintain, and
will cause each of the other Subsidiaries to maintain (either in the name of the
Borrower or such Guarantor's or such other Subsidiary's own name), with
financially sound and reputable insurance companies having an A.M. Best rating
of B+ or better, insurance on all its property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies of established repute engaged in the same or similar business.
<PAGE>
SECTION 5.15. CHANGE IN FISCAL YEAR. The Borrower and the Guarantors will
not, and will cause the other Subsidiaries to not, change its Fiscal Year
without the consent of the Required Banks.
SECTION 5.16. MAINTENANCE OF PROPERTY; PRINCIPAL BUSINESS. The Borrower and
the Guarantors shall, and shall cause each other Subsidiary to, maintain all of
its properties and assets in good condition, repair and working order, ordinary
wear and tear excepted, and maintain all Multi-Family Property (other than
Property consisting of land acquired with existing improvements which are to be
substantially demolished) in a first class manner. The principal business
operations of the Borrower and the Subsidiaries, taken as a whole, will be
directly or indirectly related to Multi-Family Properties.
SECTION 5.17. ENVIRONMENTAL NOTICES. Promptly upon any Executive Officer's
becoming aware thereof, the Borrower and the Guarantors shall furnish to the
Banks and the Administrative Agent prompt written notice of all Environmental
Liabilities, pending, threatened or anticipated Environmental Proceedings,
Environmental Notices, Environmental Judgments and Orders, and Environmental
Releases at, on, in, under or in any way affecting the Properties or any
adjacent property, which has had or is reasonably expected to cause a Material
Adverse Effect.
SECTION 5.18. ENVIRONMENTAL MATTERS. The Borrower and the Guarantors will
not, and will cause the other Subsidiaries to not, and will not permit any Third
Party to, use, produce, manufacture, process, treat, recycle, generate, store,
dispose of, manage at, or otherwise handle, or ship or transport to or from the
Properties any Hazardous Materials except for Hazardous Materials such as
cleaning solvents, pesticides and other materials used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed, managed, or otherwise
handled in compliance in all material respects with all applicable Environmental
Requirements.
SECTION 5.19. ENVIRONMENTAL RELEASE. The Borrower and the Guarantors agree
that upon any Executive Officer's becoming aware of the occurrence of an
Environmental Release at or on any of the Properties the Borrower will act
promptly to investigate the extent of, and to take appropriate action to
remediate such Environmental Release, whether or not ordered or otherwise
directed to do so by any Environmental Authority.
<PAGE>
SECTION 5.20. TRANSACTIONS WITH AFFILIATES. Neither the Borrower, the
Guarantors nor any of the other Subsidiaries shall enter into, or be a party to,
any transaction with any Affiliate of the Borrower, such Guarantor or such other
Subsidiary (which Affiliate is not GBP, the Borrower, a Guarantor or a Wholly
Owned Subsidiary), except as permitted by law and in the ordinary course of
business and pursuant to reasonable terms which are no less favorable to
Borrower or such Subsidiary than would be obtained in a comparable arm's length
transaction with a Person which is not an Affiliate.
SECTION 5.21. AMENDMENT OF OTHER AGREEMENTS. Within 90 days after the
Closing Date, the Borrower shall amend all other agreements pertaining to credit
facilities with any of the Banks so as to conform the financial covenants
contained therein to those contained in this Agreement.
SECTION 5.22. QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST; GENERAL
PARTNER. GBP shall at all times remain qualified under the Code as a real estate
investment trust and Gables GP, Inc. shall at all times be the General Partner.
The Borrower will not agree to amend or waive the requirements of Section 3.2 of
the limited partnership agreement of the Borrower, as in effect on the date of
this Agreement, as such requirements are applicable to the General Partner,
without the prior written consent of the Required Banks (which consent the Banks
hereby agree not to unreasonably withhold or delay).
SECTION 5.23. SIGNIFICANT SUBSIDIARIES TO BE GUARANTORS; ELECTION TO BECOME
GUARANTOR. Any Subsidiary (whether existing on the Closing Date or acquired or
created thereafter) (i) must become a Guarantor promptly upon becoming a
Significant Subsidiary, and (ii) may elect to become a Guarantor at any time if
it is not a Significant Subsidiary, in each case by (x) executing and delivering
to the Administrative Agent a counterpart of the Guaranty and a counterpart of
the Contribution Agreement, thereby becoming a party to each of them, (y)
delivering to the Administrative Agent an opinion of counsel to such Subsidiary,
in form and substance satisfactory to the Administrative Agent in its reasonable
discretion, the form attached hereto as EXHIBIT B (being one such satisfactory
<PAGE>
form, but limited to such Subsidiary, and making appropriate modifications,
including references to this Agreement and to Wachovia Bank, N.A., as
Administrative Agent, rather than to the Original Agreement and Wachovia Bank of
Georgia, N.A., respectively, and excluding paragraph 2 thereof, and (z)
delivering to the Administrative Agent documents pertaining to the Subsidiary
reasonably requested by the Administrative Agent of the types described in
paragraph (f) of Section 3.01 (but making appropriate modifications, including
references to this Agreement and to Wachovia Bank, N.A., as Administrative
Agent, rather than to the Original Agreement and Wachovia Bank of Georgia, N.A.,
respectively).
SECTION 5.24. CERTAIN PROVISIONS REGARDING ELIGIBLE PROPERTIES. Neither the
Borrower nor any Consolidated Subsidiary will create, assume or suffer to exist
any Lien on any Eligible Property included in the Borrowing Base, now owned or
hereafter acquired by it, except Permitted Encumbrances.
SECTION 5.25 RESTRICTIONS OF CERTAIN ADDITIONAL GUARANTEES. Neither the
Borrower nor any of the Guarantors shall incur or permit to exist any Guarantees
of unsecured revolving Debt, other than the Guaranty made hereunder, in an
aggregate principal amount outstanding at any time of $25,000,000 or more.
SECTION 5.26 MAINTENANCE OF EXISTENCE. The Borrower shall, and shall cause
each Subsidiary to, maintain its corporate existence and carry on its business
in substantially the same manner and in substantially the same fields as such
business is now carried on and maintained.
SECTION 5.27 RATIO OF TOTAL UNENCUMBERED ASSETS VALUE TO UNSECURED FUNDED
DEBT. The ratio of Total Unencumbered Assets Value to Unsecured Funded Debt will
not at any time be less than 1.75 to 1.00.
<PAGE>
ARTICLE VI
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan
or shall fail to pay any interest on any Loan within 5 Domestic Business
Days after such interest shall become due, or shall fail to pay any fee or
other amount payable hereunder within 5 Domestic Business Days after such
fee or other amount becomes due; or
(b) the Borrower or any Guarantor shall fail to observe or perform any
covenant contained in Sections 5.01(c), 5.02(ii), 5.03 through 5.12,
inclusive, Sections 5.22 or Sections 5.24 through 5.27; or
(c) the Borrower or any Guarantor shall fail to observe or perform any
covenant or agreement contained in this Agreement or any other Loan
Document (other than those covered by paragraph (a) or (b) above) and such
failure shall not have been cured within 30 days after the earlier to occur
of (i) written notice thereof has been given to the Borrower or such
Guarantor by the Administrative Agent at the request of any Bank or (ii) an
Executive Officer or such Guarantor otherwise becomes aware of any such
failure; or
(d) any representation, warranty, certification or statement made by
the Borrower or any Guarantor in Article IV of this Agreement or in any
other Loan Document or in any certificate, financial statement or other
document delivered pursuant to this Agreement or any other Loan Document
shall prove to have been incorrect or misleading in any material respect
when made (or deemed made); or
(e) the Borrower, GBP or any Subsidiary shall fail to make any payment
in respect of Debt outstanding (other than the Notes) when due or within
any applicable grace period, if the amount of any such Debt of the
Borrower, GBP or any Subsidiary individually is $5,000,000 or more or if
the aggregate amount of all such Debt of the Borrower, GBP and all
Subsidiaries is $10,000,000 or more; or
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(f) any event or condition shall occur which results in the
acceleration of the maturity of Debt outstanding of the Borrower, GBP or
any Subsidiary (including, without limitation, any required mandatory
prepayment or "put" of such Debt to the Borrower or any Subsidiary) or
enables (or, with the giving of notice or lapse of time or both, would
enable) the holders of such Debt or commitment or any Person acting on such
holders' behalf to accelerate the maturity thereof or terminate any such
commitment (including, without limitation, any required mandatory
prepayment or "put" of such Debt to the Borrower or any Subsidiary), if the
amount of any such Debt of the Borrower, GBP or any Subsidiary individually
is $5,000,000 or more or if the aggregate amount of all such Debt of the
Borrower, GBP and all Subsidiaries is $10,000,000 or more; or
(g) the Borrower, GBP or any Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
they become due, or shall take any corporate action to authorize any of the
foregoing; or
(h) an involuntary case or other proceeding shall be commenced against
the Borrower, GBP or any Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against
the Borrower, GBP or any Subsidiary under the federal bankruptcy laws as
now or hereafter in effect; or
(i) the Borrower or any member of the Controlled Group shall fail to
pay when due any material amount which it shall have become liable to pay
to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans shall be filed under Title IV of ERISA by the
Borrower, any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
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Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of
ERISA and such proceeding shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must
be terminated; or the Borrower or any other member of the Controlled Group
shall enter into, contribute or be obligated to contribute to, terminate or
incur any withdrawal liability with respect to, a Multiemployer Plan; or
(j) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $1,000,000 shall be rendered against the
Borrower or any Subsidiary and such judgment or order shall continue
unsatisfied and unstayed for a period of 30 days; or
(k) a federal tax lien shall be filed against the Borrower or any
Subsidiary under Section 6323 of the Code or a lien of the PBGC shall be
filed against the Borrower or any Subsidiary under Section 4068 of ERISA
and in either case such lien shall remain undischarged for a period of 25
days after the date of filing.
then, and in every such event, (i) the Administrative Agent shall, if requested
by the Required Banks, by notice to the Borrower terminate the Commitments and
they shall thereupon terminate, (ii) the Administrative Agent shall, if
requested by the Required Banks, by notice to the Borrower declare the Notes
(together with accrued interest thereon), and all other amounts payable
hereunder and under the other Loan Documents, to be, and the Notes, together
with accrued interest thereon, and all other amounts payable hereunder and under
the other Loan Documents shall thereupon become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower together with interest at the Default Rate
accruing on the principal amount thereof from and after the date of such Event
of Default, and (iii) any Bank may terminate its obligation to fund a Money
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Market Loan in connection with any relevant Money Market Quote; provided that if
any Event of Default specified in paragraph (g) or (h) above occurs with respect
to the Borrower, without any notice to the Borrower or any other act by the
Administrative Agent or the Banks, the Commitments shall thereupon terminate and
the Notes (together with accrued interest thereon) and all other amounts payable
hereunder and under the other Loan Documents shall automatically and without
notice become immediately due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower
together with interest thereon at the Default Rate accruing on the principal
amount thereof from and after the date of such Event of Default. Notwithstanding
the foregoing, the Administrative Agent shall have available to it all other
remedies at law or equity, and under any of the other Loan Documents, and shall
exercise any one or all of them at the request of the Required Banks.
SECTION 6.02. NOTICE OF DEFAULT. The Administrative Agent shall give notice
to the Borrower of any Default under Section 6.01(c) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. APPOINTMENT; POWERS AND IMMUNITIES. (a) Each Bank hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Administrative Agent by the terms hereof and
thereof, together with such other powers as are reasonably incidental thereto.
The Administrative Agent: (a) shall have no duties or responsibilities except as
expressly set forth in this Agreement and the other Loan Documents, and shall
not by reason of this Agreement or any other Loan Document be a trustee for any
Bank; (b) shall not be responsible to the Banks for any recitals, statements,
representations or warranties contained in this Agreement or any other Loan
Document, or in any certificate or other document referred to or provided for
in, or received by any Bank under, this Agreement or any other Loan Document, or
for the validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document or any other document referred to or
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provided for herein or therein or for any failure by the Borrower to perform any
of its obligations hereunder or thereunder; (c) shall not be required to
initiate or conduct any litigation or collection proceedings hereunder or under
any other Loan Document except to the extent requested by the Required Banks,
and then only on terms and conditions satisfactory to the Administrative Agent,
and (d) shall not be responsible for any action taken or omitted to be taken by
it hereunder or under any other Loan Document or any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or wilful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The provisions of this
Article VII are solely for the benefit of the Administrative Agent and the
Banks, and the Borrower shall not have any rights as a third party beneficiary
of any of the provisions hereof. In performing its functions and duties under
this Agreement and under the other Loan Documents, the Administrative Agent
shall act solely as agent of the Banks and does not assume and shall not be
deemed to have assumed any obligation towards or relationship of agency or trust
with or for the Borrower. The duties of the Administrative Agent shall be
ministerial and administrative in nature, and the Administrative Agent shall not
have by reason of this Agreement or any other Loan Document a fiduciary
relationship in respect of any Bank. The Administrative Agent shall administer
the Loans and the Loan Documents with a degree of care at least equal to that
customarily employed by the Administrative Agent in the administration of
similar credit facilities for its own account.
(b) Each Bank hereby designates First Union National Bank as Syndication
Agent and Chase Bank of Texas, National Association as Documentation Agent. The
Syndication Agent and the Documentation Agent, in such capacities, shall have no
duties or obligations whatsoever under this Agreement or any other Loan Document
or any other document or any matter related hereto and thereto, but shall
nevertheless be entitled to all the indemnities and other protection afforded to
the Agent under this Article VII.
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SECTION 7.02. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telecopier, telegram or cable) believed by
it to be genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants or other experts selected by the Administrative Agent.
As to any matters not expressly provided for by this Agreement or any other Loan
Document, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder and thereunder in accordance
with instructions signed by the Required Banks, and such instructions of the
Required Banks in any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
SECTION 7.03. DEFAULTS. The Administrative Agent shall not be deemed to
have knowledge of the occurrence of a Default or an Event of Default (other than
the nonpayment of principal of or interest on the Loans) unless the
Administrative Agent has received notice from a Bank or the Borrower specifying
such Default or Event of Default and stating that such notice is a "Notice of
Default". In the event that the Administrative Agent receives such a notice of
the occurrence of a Default or an Event of Default, the Administrative Agent
shall give prompt notice thereof to the Banks. The Administrative Agent shall
give each Bank prompt notice of each nonpayment of principal of or interest on
the Loans whether or not it has received any notice of the occurrence of such
nonpayment. The Administrative Agent shall (subject to Section 9.06) take such
action hereunder with respect to such Default or Event of Default as shall be
directed by the Required Banks, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Banks.
SECTION 7.04. RIGHTS OF ADMINISTRATIVE AGENT AND ITS AFFILIATES AS A BANK.
With respect to the Loans made by the Administrative Agent and any Affiliate of
the Administrative Agent, Wachovia in its capacity as a Bank hereunder and any
Affiliate of the Administrative Agent or such Affiliate in its capacity as a
Bank hereunder shall have the same rights and powers hereunder as any other Bank
and may exercise the same as though Wachovia were not acting as the
Administrative Agent, and the term "Bank" or "Banks" shall, unless the context
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otherwise indicates, include Wachovia in its individual capacity and any
Affiliate of the Administrative Agent in its individual capacity. The
Administrative Agent and any Affiliate of the Administrative Agent may (without
having to account therefor to any Bank) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with the
Borrower (and any of the Borrower's Affiliates) as if Wachovia were not acting
as the Administrative Agent, and the Administrative Agent and any Affiliate of
the Administrative Agent may accept fees and other consideration from the
Borrower (in addition to any agency fees and arrangement fees heretofore agreed
to between the Borrower and the Administrative Agent) for services in connection
with this Agreement or any other Loan Document or otherwise without having to
account for the same to the Banks.
SECTION 7.05. INDEMNIFICATION. Each Bank severally agrees to indemnify the
Administrative Agent, to the extent the Administrative Agent shall not have been
reimbursed by the Borrower, ratably in accordance with its Commitment, for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including, without limitation, counsel fees
and disbursements) or disbursements of any kind and nature whatsoever which may
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement or any other Loan Document or
any other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (excluding, unless an Event of
Default has occurred and is continuing, the normal administrative costs and
expenses incident to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or any such other documents;
provided that no Bank shall be liable for any of the foregoing to the extent
they arise from the gross negligence or wilful misconduct of the Administrative
Agent. If any indemnity furnished to the Administrative Agent for any purpose
shall, in the opinion of the Administrative Agent, be insufficient or become
impaired, the Administrative Agent may call for additional indemnity and cease,
or not commence, to do the acts indemnified against until such additional
indemnity is furnished.
SECTION 7.06 CONSEQUENTIAL DAMAGES. The administrative agent shall not be
responsible or liable to any bank, the borrower or any other person or entity
for any punitive, exemplary or consequential damages which may be alleged as a
results of this agreement, the other loan documents or any of the transactions
contemplated hereby or thereby.
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SECTION 7.07. PAYEE OF NOTE TREATED AS OWNER. The Administrative Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
hereof unless and until a written notice of the assignment or transfer thereof
shall have been filed with the Administrative Agent and the provisions of
Section 9.08(c) have been satisfied. Any requests, authority or consent of any
Person who at the time of making such request or giving such authority or
consent is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee or assignee of that Note or of any Note or Notes
issued in exchange therefor or replacement thereof.
SECTION 7.08. NONRELIANCE ON ADMINISTRATIVE AGENT AND OTHER BANKS. Each
Bank agrees that it has, independently and without reliance on the
Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrower and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any of the other Loan Documents. The
Administrative Agent shall not be required to keep itself (or any Bank) informed
as to the performance or observance by the Borrower of this Agreement or any of
the other Loan Documents or any other document referred to or provided for
herein or therein or to inspect the properties or books of the Borrower or any
other Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Administrative Agent
hereunder or under the other Loan Documents, the Administrative Agent shall not
have any duty or responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of the
Borrower or any other Person (or any of their Affiliates) which may come into
the possession of the Administrative Agent; provided, that the Administrative
Agent shall make available to any Bank, upon its request, (i) copies of the
Administrative Agent's records with respect to all sums received or expended by
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the Administrative Agent in connection with the Loans and the Loan Documents,
(ii) information as to the amount of the then outstanding Loans, and (iii)
copies of any documents pertaining to an Eligible Property requested by such
Bank and held by the Administrative Agent pursuant to Section 5.24(b).
SECTION 7.09. FAILURE TO ACT. Except for action expressly required of the
Administrative Agent hereunder or under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction by the Banks of their indemnification obligations
under Section 7.05 against any and all liability and expense which may be
incurred by the Administrative Agent by reason of taking, continuing to take, or
failing to take any such action.
SECTION 7.10. RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT. Subject to
the appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Banks and the Borrower and the Administrative Agent may be removed at any
time with or without cause by the Required Banks. Upon any such resignation or
removal, the Required Banks shall have the right to appoint a successor
Administrative Agent, subject to the approval of the Borrower, which approval
shall not be unreasonably withheld or delayed; provided, however, that no such
approval of the Borrower shall be required if (i) the successor is a Bank or
(ii) a Default or Event of Default is in existence. If no successor
Administrative Agent shall have been so appointed by the Required Banks and
shall have accepted such appointment within 30 days after the retiring
Administrative Agent's notice of resignation or the Required Banks' removal of
the retiring Administrative Agent, then the retiring Administrative Agent may,
on behalf of the Banks, appoint a successor Administrative Agent, subject to the
approval of the Borrower, which approval shall not be unreasonably withheld or
delayed; provided, however, that no such approval of the Borrower shall be
required if (i) the successor is a Bank or (ii) a Default or Event of Default is
in existence. Any successor Administrative Agent shall be a bank which has a
combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
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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. After any retiring Administrative
Agent's resignation or removal hereunder as Administrative Agent, the provisions
of this Article VII shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the
Administrative Agent hereunder.
SECTION 7.11 ADMINISTRATIVE AGENT'S RIGHT TO REPLACE NON-QUALIFYING BANK.
In the event that any Bank (a "Non-Qualifying Bank") shall at the end of any
quarter not qualify as a "well-capitalized" bank (within the meaning provided
therefor in 12 CFR 6, as amended from time to time) under the regulations or
policies of the Comptroller of the Currency, or the sum of its non-performing
assets and its "Other Real Estate Owned" shall be equal to more than fifty
percent (50%) of its tangible equity, the Administrative Agent, in its sole
discretion, may give notice to such Non-Qualifying Bank and to the other Banks,
with a copy to the Borrower (the "Replacement Notice"), that it wishes to seek
one or more assignees (which may be one or more of the Banks) to assume the
Commitment of such Non-Qualifying Bank and to purchase its outstanding Loans and
Notes and interest in this Agreement, and in such event: (i) the remaining Banks
may elect to purchase ratable assignments (without any obligation so to do) from
the Non-Qualifying Bank (in the form of an Assignment and Acceptance and in
accordance with Section 9.08(c)) in accordance with their respective percentage
of the remaining aggregate Commitments, by giving notice of such election to the
Administrative Agent and the other Banks, with a copy to the Borrower, no later
than the date (the "Initial Option Date") which is 15 days after the date of the
Replacement Notice; (ii) should any of the remaining Banks not elect on or
before the Initial Option Date to purchase such an assignment, then, such other
remaining Banks shall be entitled to purchase an assignment from Non-Qualifying
Bank which includes the ratable interest that was otherwise available to such
non-purchasing remaining Bank or Banks, by giving notice of such election to the
Administrative Agent and the other Banks, with a copy to the Borrower, within 15
days after the Initial Option Date; and (iii) if and to the extent that the
remaining Banks have not elected to purchase such an assignment, the
Administrative Agent may find another assignee to purchase such assignment. Each
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Non-Qualifying Bank agrees to sell its Commitment, Loans, Notes and interest in
this Agreement by an Assignment and Acceptance in accordance with Section
9.08(c) to any such assignee or assignees for an amount equal to the sum of the
outstanding unpaid principal of and accrued interest on such Loans and Notes,
plus all other fees and amounts (including, without limitation, any compensation
claimed by such Non-Qualifying Bank under Section 2.11(c) or this Section 7.11)
due such Non-Qualifying Bank hereunder calculated, in each case, to the date
such Loans, Notes and interest are purchased. Upon such sale or prepayment, and
assumption by the assignee or assignees of the Non-Qualifying Banks's
Commitment, such Non-Qualifying Bank shall have no further Commitment or other
obligation to the Borrower hereunder or under any Note.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If
on or prior to the first day of any Interest Period:
(a) the Administrative Agent determines that deposits in Dollars (in
the applicable amounts) are not being offered in the relevant market for
such Interest Period, or
(b) the Required Banks advise the Administrative Agent that the London
Interbank Offered Rate, as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of funding the
relevant Euro-Dollar Rate Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make Euro-Dollar Loans specified in such notice
shall be suspended. Unless the Borrower notifies the Administrative Agent at
least 2 Domestic Business Days before the date of any Euro-Dollar Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
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SECTION 8.02. ILLEGALITY. If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein or any existing or
future law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof (any such
agency being referred to as an "Authority" and any such event being referred to
as a "Change of Law"), or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority shall make it unlawful or impossible for any Bank (or its Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so
notify the Administrative Agent, the Administrative Agent shall forthwith give
notice thereof to the other Banks and the Borrower, whereupon until such Bank
notifies the Borrower and the Administrative Agent that the circumstances giving
rise to such suspension no longer exist, the obligation of such Bank to make
Euro-Dollar Loans shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Bank shall designate a
different Lending Office if such designation will avoid the need for giving such
notice and will not, in the judgment of such Bank, be otherwise disadvantageous
to such Bank. If such Bank shall determine that it may not lawfully continue to
maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall
so specify in such notice, the Borrower shall immediately prepay in full the
then outstanding principal amount of each Euro-Dollar Loan of such Bank,
together with accrued interest thereon and any amount due such Bank pursuant to
Section 8.05(a). Concurrently with prepaying each such Euro-Dollar Loan, the
Borrower shall borrow a Base Rate Loan in an equal principal amount from such
Bank (on which interest and principal shall be payable contemporaneously with
the related Euro-Dollar Loans of the other Banks), and such Bank shall make such
a Base Rate Loan.
SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If after the date
hereof, a Change of Law or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority:
(i) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding with respect to any Euro-Dollar Loan any such
requirement included in an applicable Euro-Dollar Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended
by, any Bank (or its Lending Office); or
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(ii) shall impose on any Bank (or its Lending Office) or on the United
States market for certificates of deposit or the London interbank market
any other condition affecting its Fixed Rate Loans, its Notes or its
obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Lending Office) under
this Agreement or under its Notes with respect thereto, by an amount deemed by
such Bank to be material, then, within 15 days after demand by such Bank (with a
copy to the Administrative Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction.
(b) If any Bank shall have determined that after the date hereof the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof, or compliance by any Bank (or its Lending Office) with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any Authority, has or would have the effect of reducing the rate of return on
such Bank's capital as a consequence of its obligations hereunder to a level
below that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank, the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank for
such reduction.
(c) Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
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claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
(d) The provisions of this Section 8.03 shall be applicable with respect to
any Participant, Assignee or other Transferee, and any calculations required by
such provisions shall be made based upon the circumstances of such Participant,
Assignee or other Transferee.
SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR AFFECTED EURO-DOLLAR LOANS.
If (i) the obligation of any Bank to make or maintain any Euro-Dollar Loans has
been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03, and the Borrower shall, by at least 5
Euro-Dollar Business Days' prior notice to such Bank, through the Administrative
Agent, have elected that the provisions of this Section shall apply to such
Bank, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer apply:
(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans shall be made instead as Base Rate Loans, and interest
and principal on such Loans shall be payable contemporaneously with the
related Euro-Dollar Loans of the other Banks, and
(b) after each of its Euro-Dollar Loans has been repaid, all payments
of principal which would otherwise be applied to repay such Euro-Dollar
Loans shall be applied to repay its Base Rate Loans instead.
SECTION 8.05. COMPENSATION. Upon the request of any Bank, delivered to the
Borrower and the Administrative Agent, the Borrower shall pay to such Bank such
amount or amounts as shall compensate such Bank for any loss, cost or expense
incurred by such Bank as a result of:
(a) any payment or prepayment (pursuant to Section 2.09, 2.10, 6.01,
8.02 or otherwise) of a Fixed Rate Loan on a date other than the last day
of an Interest Period for such Loan; or
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(b) any failure by the Borrower to prepay a Euro-Dollar Loan on the
date for such prepayment specified in the relevant notice of prepayment
hereunder; or
(c) any failure by the Borrower to borrow a Fixed Rate Loan on the
date for the Fixed Rate Borrowing of which such Fixed Rate Loan is a part
specified in the applicable Notice of Borrowing delivered pursuant to
Section 2.02 or notification of acceptance of Money Market Quotes pursuant
to Section 2.02A(e);
such compensation to include, without limitation, if such Fixed Rate Loan is a
Euro-Dollar Loan, an amount equal to the excess, if any, of (x) the amount of
interest which would have accrued on the amount so paid or prepaid or not
prepaid or borrowed for the period from the date of such payment, prepayment or
failure to prepay or borrow to the last day of the then current Interest Period
for such Fixed Rate Loan (or, in the case of a failure to prepay or borrow, the
Interest Period for such Fixed Rate Loan which would have commenced on the date
of such failure to prepay or borrow) at the applicable rate of interest for such
Fixed Rate Loan provided for herein over (y) the amount of interest (as
reasonably determined by such Bank) such Bank would have paid on deposits in
Dollars of comparable amounts having terms comparable to such period placed with
it by leading banks in the London interbank market.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address or telecopier number
set forth on the signature pages hereof or such other address or telecopier
number as such party may hereafter specify for the purpose by notice to each
other party. Each such notice, request or other communication shall be effective
(i) if given by telecopier, when such telecopy is transmitted to the telecopier
number specified in this Section and the confirmation is received, (ii) if given
by mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified in this Section; provided that
notices to the Administrative Agent under Article II or Article IX shall not be
effective until received.
<PAGE>
SECTION 9.02. NO WAIVERS. No failure or delay by the Administrative Agent
or any Bank in exercising any right, power or privilege hereunder or under any
Note or other Loan Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. EXPENSES; DOCUMENTARY TAXES. The Borrower shall pay (i) all
out-of-pocket expenses of the Administrative Agent, including fees and
disbursements of Jones, Day, Reavis & Pogue, special counsel for the Banks and
the Administrative Agent, in connection with the preparation of this Agreement
and the other Loan Documents, any waiver or consent hereunder or thereunder or
any amendment hereof or thereof or any Default or alleged Default hereunder or
thereunder, (ii) legal fees up to but not in excess of $10,000, plus expenses,
incurred by each Bank in connection with the preparation of this Agreement and
the other Loan Documents and (iii) if a Default occurs, all out-of-pocket
expenses incurred by the Administrative Agent and the Banks, including fees and
disbursements of counsel, in connection with such Default and collection and
other enforcement proceedings resulting therefrom, including out-of-pocket
expenses incurred in enforcing this Agreement and the other Loan Documents. The
Borrower shall indemnify the Administrative Agent and each Bank against any
transfer taxes, documentary taxes, assessments or charges made by any Authority
by reason of the execution and delivery of this Agreement or the other Loan
Documents. The provisions of this Section 9.03 are in addition to and not in
limitation of any expense reimbursement or indemnification provision contained
in any other Loan Documents.
SECTION 9.04. INDEMNIFICATION. The Borrower shall indemnify the
Administrative Agent, the Banks and each Affiliate thereof and their respective
directors, officers, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims or damages to which any of them
may become subject, insofar as such losses, liabilities, claims or damages arise
out of or result from any actual or proposed use by the Borrower of the proceeds
<PAGE>
of any extension of credit by any Bank hereunder or breach by the Borrower of
this Agreement or any other Loan Document or from any investigation, litigation
(including, without limitation, any actions taken by the Administrative Agent or
any of the Banks to enforce this Agreement or any of the other Loan Documents)
or other proceeding (including, without limitation, any threatened investigation
or proceeding) relating to the foregoing, and the Borrower shall reimburse the
Administrative Agent and each Bank, and each Affiliate thereof and their
respective directors, officers, employees and agents, upon demand for any
expenses (including, without limitation, legal fees) incurred in connection with
any such investigation or proceeding; but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or wilful misconduct of the Person to be indemnified. The provisions
of this Section 9.04 are in addition to and not in limitation of any expense
reimbursement or indemnification provision contained in any other Loan
Documents.
SECTION 9.05. SHARING OF SETOFFS. Each Bank agrees that if it shall, by
exercising any right of setoff or counterclaim or resort to collateral security
or otherwise, receive payment of a proportion of the aggregate amount of
principal and interest owing with respect to the Note held by it which is
greater than the proportion received by any other Bank in respect of the
aggregate amount of all principal and interest owing with respect to the Note
held by such other Bank, the Bank receiving such proportionately greater payment
shall purchase such participations in the Notes held by the other Banks owing to
such other Banks, and such other adjustments shall be made, as may be required
so that all such payments of principal and interest with respect to the Notes
held by the Banks owing to such other Banks shall be shared by the Banks pro
rata; provided that (i) nothing in this Section shall impair the right of any
Bank to exercise any right of setoff or counterclaim it may have and to apply
the amount subject to such exercise to the payment of indebtedness of the
Borrower other than its indebtedness under the Notes, and (ii) if all or any
portion of such payment received by the purchasing Bank is thereafter recovered
from such purchasing Bank, such purchase from each other Bank shall be rescinded
and such other Bank shall repay to the purchasing Bank the purchase price of
such participation to the extent of such recovery together with an amount equal
to such other Bank's ratable share (according to the proportion of (x) the
amount of such other Bank's required repayment to (y) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in a Note, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of setoff or
counterclaim and other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of the Borrower in the
amount of such participation.
SECTION 9.06. AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement,
the Notes or any other Loan Documents may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of the Administrative Agent are
affected thereby, by the Administrative Agent); provided that no such amendment
or waiver shall, unless signed by all Banks, (i) change the Commitment of any
Bank or subject any Bank to any additional obligation, (ii) change the principal
of or rate of interest on any Loan or any fees (other than fees payable to the
Administrative Agent) hereunder, (iii) change the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder, (iv) change the
amount of principal, interest or fees due on any date fixed for the payment
thereof, (v) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the percentage of Banks, which shall be
required for the Banks or any of them to take any action under this Section or
any other provision of this Agreement, (vi) change the manner of application of
any payments made under this Agreement or the Notes, (vii) release or substitute
all or any substantial part of the collateral (if any) held as security for the
Loans, except as expressly authorized by this Agreement or any of the other Loan
Documents, (viii) release any Guarantee given to support payment of the Loans,
(ix) change the definition of Borrowing Base in a such a way as to make it less
restrictive, (x) change the definition of Required Banks or (xi) change this
Section 9.06.
(b) The Borrower will not solicit, request or negotiate for or with respect
to any proposed waiver or amendment of any of the provisions of this Agreement
unless each Bank shall be informed thereof by the Borrower and shall be afforded
an opportunity of considering the same and shall be supplied by the Borrower
<PAGE>
with sufficient information to enable it to make an informed decision with
respect thereto. Executed or true and correct copies of any waiver or consent
effected pursuant to the provisions of this Agreement shall be delivered by the
Borrower to each Bank forthwith following the date on which the same shall have
been executed and delivered by the requisite percentage of Banks. The Borrower
will not, directly or indirectly, pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee or otherwise, to any
Bank (in its capacity as such) as consideration for or as an inducement to the
entering into by such Bank of any waiver or amendment of any of the terms and
provisions of this Agreement unless such remuneration is concurrently paid, on
the same terms, ratably to all such Banks.
SECTION 9.07. NO MARGIN STOCK COLLATERAL. Each of the Banks represents to
the Administrative Agent and each of the other Banks that it in good faith is
not, directly or indirectly (by negative pledge or otherwise), relying upon any
Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 9.08. 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; provided that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement.
(b) Any Bank may at any time sell to one or more Persons (each a
"Participant") participating interests in any Loan owing to such Bank, any Note
held by such Bank, any Commitment hereunder or any other interest of such Bank
hereunder. In the event of any such sale by a Bank of a participating interest
to a Participant, such Bank's obligations under this Agreement shall remain
unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Note for all purposes
under this Agreement, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement. In no event shall a Bank
that sells a participation be obligated to the Participant to take or refrain
from taking any action hereunder except that such Bank may agree that it will
<PAGE>
not (except as provided below), without the consent of the Participant, agree to
(i) the change of any date fixed for the payment of principal of or interest on
the related Loan or loans, (ii) the change of the amount of any principal,
interest or fees due on any date fixed for the payment thereof with respect to
the related Loan or loans, (iii) the change of the principal of the related Loan
or loans, (iv) any change in the rate at which either interest is payable
thereon or (if the Participant is entitled to any part thereof) fee is payable
hereunder from the rate at which the Participant is entitled to receive interest
or fee (as the case may be) in respect of such participation, (v) the release or
substitution of all or any substantial part of the collateral (if any) held as
security for the Loans, or (vi) the release of any Guarantee given to support
payment of the Loans. Each Bank selling a participating interest in any Loan,
Note, Commitment or other interest under this Agreement (other than solely with
respect to a Money Market Loan or Money Market Note or participating interest
therein) shall, within 10 Domestic Business Days of such sale, provide the
Borrower and the Administrative Agent with written notification stating that
such sale has occurred and identifying the Participant and the interest
purchased by such Participant. The Borrower agrees that each Participant shall
be entitled to the benefits of Article IX with respect to its participation in
Loans outstanding from time to time.
(c) Any Bank may at any time assign to one or more banks or financial
institutions (each an "Assignee") all or a proportionate part of its rights and
obligations under this Agreement, the Notes and the other Loan Documents, and
such Assignee shall assume all such rights and obligations, pursuant to an
Assignment and Acceptance, executed by such Assignee, such transferor Bank and
the Administrative Agent (and, in the case of an Assignee that is not then a
Bank, subject to clause (iii) below, by the Borrower); provided that (i) no
interest may be sold by a Bank pursuant to this paragraph (c) unless the
Assignee shall agree to assume ratably equivalent portions of the transferor
Bank's Commitment, (ii) if a Bank is assigning only a portion of its Commitment,
then, the amount of the Commitment being assigned (determined as of the
effective date of the assignment) shall be in an amount not less than
$5,000,000, (iii) except during the continuance of a Default, no interest may be
sold by a Bank pursuant to this paragraph (c) to any Assignee that is not then a
Bank (or an Affiliate of a Bank) without the consent of the Borrower and the
Administrative Agent, which consent shall not be unreasonably withheld, and (iv)
<PAGE>
a Bank may not have more than 2 Assignees that are not then Banks at any one
time. Upon (A) execution of the Assignment and Acceptance by such transferor
Bank, such Assignee, the Administrative Agent and (if applicable) the Borrower,
(B) delivery of an executed copy of the Assignment and Acceptance to the
Borrower and the Administrative Agent, (C) payment by such Assignee to such
transferor Bank of an amount equal to the purchase price agreed between such
transferor Bank and such Assignee, and (D) payment of a processing and
recordation fee of $2,500 to the Administrative Agent, such Assignee shall for
all purposes be a Bank party to this Agreement and shall have all the rights and
obligations of a Bank under this Agreement to the same extent as if it were an
original party hereto with a Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by the
Borrower, the Banks or the Administrative Agent shall be required. Upon the
consummation of any transfer to an Assignee pursuant to this paragraph (c), the
transferor Bank, the Administrative Agent and the Borrower shall make
appropriate arrangements so that, if required, a new Note is issued to each of
such Assignee and such transferor Bank.
(d) Subject to the provisions of Section 9.09, the Borrower authorizes each
Bank to disclose to any Participant, Assignee or other transferee (each a
"Transferee") and any prospective Transferee any and all financial information
in such Bank's possession concerning the Borrower which has been delivered to
such Bank by the Borrower pursuant to this Agreement or which has been delivered
to such Bank by the Borrower in connection with such Bank's credit evaluation
prior to entering into this Agreement.
(e) No Transferee shall be entitled to receive any greater payment under
Section 8.03 than the transferor Bank would have been entitled to receive with
respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the provisions of Section 8.02
or 8.03 requiring such Bank to designate a different Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
<PAGE>
(f) Anything in this Section 9.08 to the contrary notwithstanding, any Bank
may assign and pledge all or any portion of the Loans and/or obligations owing
to it to any Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors of the Federal
Reserve System and any Operating Circular issued by such Federal Reserve Bank,
provided that any payment in respect of such assigned Loans and/or obligations
made by the Borrower to the assigning and/or pledging Bank in accordance with
the terms of this Agreement shall satisfy the Borrower's obligations hereunder
in respect of such assigned Loans and/or obligations to the extent of such
payment. No such assignment shall release the assigning and/or pledging Bank
from its obligations hereunder.
SECTION 9.09. CONFIDENTIALITY. Each Bank agrees to exercise commercially
reasonable efforts to keep any information delivered or made available by the
Borrower to it which is clearly indicated to be confidential information,
confidential from anyone other than persons employed or retained by such Bank
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Loans; provided that nothing herein shall prevent any Bank
from disclosing such information (i) to any other Bank, (ii) upon the order of
any court or administrative agency, (iii) upon the request or demand of any
regulatory agency or authority having jurisdiction over such Bank, (iv) which
has been publicly disclosed, (v) to the extent reasonably required in connection
with any litigation to which the Administrative Agent, any Bank or their
respective Affiliates may be a party, (vi) to the extent reasonably required in
connection with the exercise of any remedy hereunder, (vii) to such Bank's legal
counsel and independent auditors and (viii) to any actual or proposed
Participant, Assignee or other Transferee of all or part of its rights hereunder
which has agreed in writing to be bound by the provisions of this Section 9.09;
provided that should disclosure of any such confidential information be required
by virtue of clause (ii) of the immediately preceding sentence, any relevant
Bank shall, to the extent permitted by law, promptly notify the Borrower of same
so as to allow the Borrower to seek a protective order or to take any other
appropriate action; provided, further, that, no Bank shall be required to delay
compliance with any directive to disclose any such information so as to allow
the Borrower to effect any such action.
<PAGE>
SECTION 9.10. REPRESENTATION BY BANKS. Each Bank hereby represents that it
is a commercial lender or financial institution which makes loans in the
ordinary course of its business and that it will make its Loans hereunder for
its own account in the ordinary course of such business; provided that, subject
to Section 9.08, the disposition of the Note or Notes held by that Bank shall at
all times be within its exclusive control.
SECTION 9.11. OBLIGATIONS SEVERAL. The obligations of each Bank hereunder
are several, and no Bank shall be responsible for the obligations or commitment
of any other Bank hereunder. Nothing contained in this Agreement and no action
taken by the Banks pursuant hereto shall be deemed to constitute the Banks to be
a partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Bank shall be a separate and
independent debt, and each Bank shall be entitled to protect and enforce its
rights arising out of this Agreement or any other Loan Document and it shall not
be necessary for any other Bank to be joined as an additional party in any
proceeding for such purpose.
SECTION 9.12. GEORGIA LAW. This Agreement and each Note shall be construed
in accordance with and governed by the law of the State of Georgia.
SECTION 9.13. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement, the Notes or any of the other Loan Documents should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby and shall be enforced to the
greatest extent permitted by law.
SECTION 9.14. INTEREST. In no event shall the amount of interest, and all
charges, amounts or fees contracted for, charged or collected pursuant to this
Agreement, the Notes or the other Loan Documents and deemed to be interest under
applicable law (collectively, "Interest") exceed the highest rate of interest
allowed by applicable law (the "Maximum Rate"), and in the event any such
payment is inadvertently received by any Bank, then the excess sum (the
"Excess") shall be credited as a payment of principal, unless the Borrower shall
notify such Bank in writing that it elects to have the Excess returned
forthwith. It is the express intent hereof that the Borrower not pay and the
<PAGE>
Banks not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may legally be paid by the Borrower under applicable law.
The right to accelerate maturity of any of the Loans does not include the right
to accelerate any interest that has not otherwise accrued on the date of such
acceleration, and the Administrative Agent and the Banks do not intend to
collect any unearned interest in the event of any such acceleration. All monies
paid to the Administrative Agent or the Banks hereunder or under any of the
Notes or the other Loan Documents, whether at maturity or by prepayment, shall
be subject to rebate of unearned interest as and to the extent required by
applicable law. By the execution of this Agreement, the Borrower covenants, to
the fullest extent permitted by law, that (i) the credit or return of any Excess
shall constitute the acceptance by the Borrower of such Excess, and (ii) the
Borrower shall not seek or pursue any other remedy, legal or equitable , against
the Administrative Agent or any Bank, based in whole or in part upon contracting
for charging or receiving any Interest in excess of the Maximum Rate. For the
purpose of determining whether or not any Excess has been contracted for,
charged or received by the Administrative Agent or any Bank, all interest at any
time contracted for, charged or received from the Borrower in connection with
this Agreement, the Notes or any of the other Loan Documents shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
in equal parts throughout the full term of the Commitments. The Borrower, the
Administrative Agent and each Bank shall, to the maximum extent permitted under
applicable law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as Interest and (ii) exclude voluntary prepayments and the
effects thereof. The provisions of this Section shall be deemed to be
incorporated into each Note and each of the other Loan Documents (whether or not
any provision of this Section is referred to therein). All such Loan Documents
and communications relating to any Interest owed by the Borrower and all figures
set forth therein shall, for the sole purpose of computing the extent of
obligations hereunder and under the Notes and the other Loan Documents be
automatically recomputed by the Borrower, and by any court considering the same,
to give effect to the adjustments or credits required by this Section.
<PAGE>
SECTION 9.15. INTERPRETATION. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
SECTION 9.16. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. The Borrower
(a) and each of the Banks and the Administrative Agent irrevocably waives, to
the fullest extent permitted by law, any and all right to trial by jury in any
legal proceeding arising out of this Agreement, any of the other Loan Documents,
or any of the transactions contemplated hereby or thereby, (b) submits to the
nonexclusive personal jurisdiction in the State of Georgia, the courts thereof
and the United States District Courts sitting therein, for the enforcement of
this Agreement, the Notes and the other Loan Documents, (c) waives any and all
personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of Georgia for the purpose of litigation to enforce this
Agreement, the Notes or the other Loan Documents, and (d) agrees that service of
process may be made upon it in the manner prescribed in Section 9.01 for the
giving of notice to the Borrower. Nothing herein contained, however, shall
prevent the Administrative Agent from bringing any action or exercising any
rights against any security and against the Borrower personally, and against any
assets of the Borrower, within any other state or jurisdiction.
SECTION 9.17. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 9.18. SOURCE OF FUNDS -- ERISA. Each of the Banks hereby severally
(and not jointly) represents to the Borrower that no part of the funds to be
used by such Bank to fund the Loans hereunder from time to time constitutes (i)
assets allocated to any separate account maintained by such Bank in which any
employee benefit plan (or its related trust) has any interest nor (ii) any other
assets of any employee benefit plan. As used in this Section, the terms
"employee benefit plan" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
SECTION 9.19. ENTIRE AGREEMENT. The Loan Documents and, as between the
Borrower and the Administrative Agent, the Administrative Agent's Letter
Agreement, contain the entire agreement between the Borrower, the Administrative
Agent and the Banks relating to the credit transactions contemplated hereby and
supersede entirely any and all prior written or oral agreements with respect
thereto; and the Borrower acknowledges and agrees that there are no
contemporaneous oral agreements with respect to the subject matter hereof.
SECTION 9.20. MORE RESTRICTIVE AGREEMENTS. Should the Borrower or any
Guarantor, while this Agreement is in effect or any Note remains unpaid, enter
into, refinance or modify the relevant documents pertaining to any existing or
future Debt for money borrowed which constitutes revolving credit, in an amount
exceeding $5,000,000 in aggregate amount to any lender or group of lenders
acting in concert with one another, pursuant to a Loan agreement, credit
agreement, note purchase agreement, indenture or other similar instrument, which
instrument includes covenants, warranties, representations, or defaults or
events of default (or any other type of restriction which would have the
practical effect of any of the foregoing, including, without limitation, any
"put" or mandatory prepayment of such debt) other than those set forth herein or
in any of the other Loan Documents, the Borrower shall promptly so notify the
Administrative Agent and, if the Administrative Agent, in the discretion of the
Administrative Agent, shall so request by written notice to the Borrower, the
Borrower, the Administrative Agent and the Required Banks (in their sole
discretion and based on their respective independent credit judgment, and
subject to Section 9.06) shall promptly amend this Agreement to incorporate some
or all of such provisions, into this Agreement and, to the extent necessary and
reasonably desirable to the Administrative Agent and the Required Banks (in
their sole discretion and based on their respective independent credit judgment,
and subject to Section 7.06), into any of the other Loan Documents, all at the
election of the Administrative Agent; provided, however, that any such amendment
shall provide that, upon cancellation or termination of the Loan agreement,
credit agreement, note purchase agreement, indenture or other instrument
pertaining to such other revolving credit (other than by reason of an event of
default thereunder), so long as no Default or Event of Default is in existence,
such amendment also shall terminate and the provisions of the Credit Agreement
affected by such amendment shall revert to the terms thereof as in effect prior
to giving effect to such amendment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, under seal, by their respective authorized officers as of the day
and year first above written.
GABLES REALTY LIMITED PARTNERSHIP
By: Gables GP, Inc., its sole
general partner
By: /s/ Marvin R. Banks, Jr.
-----------------------------
Marvin R. Banks, Jr.
Vice President
Gables Realty Limited Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
WACHOVIA BANK, N.A.,
as Administrative Agent and as a Bank
Commitment:
$40,000,000 By: /s/ Mary F. Hughes
--------------------------------
Title: Vice President
Commitment
Percentage: Lending Office
Wachovia Bank, N.A.
17.7778% 191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Real Estate Finance Division
Telecopier number: 404-332-4005
Confirmation number: 404-332-6971
<PAGE>
FIRST UNION NATIONAL BANK,
as Syndication Agent and as a Bank
Commitment:
By: /s/ Daniel J. Sullivan
----------------------------------
$40,000,000 Daniel J. Sullivan
Director
Commitment Lending Office
Percentage: First Union National Bank
One First Union Center
17.7778% DC-6
Charlotte, North Carolina 28288-0166
Attention: Daniel J. Sullivan
Telecopier number: 704-383-6205
Confirmation number: 704-383-6441
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
as Documentation Agent and as a Bank
Commitment:
By: /s/ Brian M. Kouns
----------------------------------
$40,000,000 Title: Vice President
----------------------------------
Commitment Lending Office
Percentage: Chase Bank of Texas, National Association
707 Travis, 6th Fl. North
17.7778% Houston, Texas 77002
Attention: Brian M. Kouns, Vice President
Telecopier number: 713-216-7713
Confirmation number: 713-216-5133
<PAGE>
COMMERZBANK AG, ATLANTA AGENCY
Commitment:
By: /s/ Douglas P. Traynor
---------------------------------
$30,000,000 Title: Vice President
---------------------------------
Commitment
Percentage: By: /s/ E. Marcus Perry
---------------------------------
Title: Assistant Treasurer
---------------------------------
13.3333%
Lending Office
Commerzbank AG, Atlanta Agency
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: Petra Conroy
Telecopier number: 404-881-6539
Confirmation number: 404-888-6531
PNC BANK, NATIONAL ASSOCIATION.
Commitment:
By: /s/ Daniel R. Heberle
----------------------------------
$30,000,000 Title: Assistant Vice President
----------------------------------
Commitment Lending Office
Percentage: PNC BANK, National Association
201 East Fifth Street
13.3333% Cincinnati, Ohio 45201-1198
Attention: Daniel R. Heberle
Assistant Vice President
Telecopier number: 513-651-8931
Confirmation number: 513-651-8962
<PAGE>
AMSOUTH BANK OF ALABAMA
Commitment:
By: /s/ Rebecca Shuler
----------------------------------
$25,000,000 Title: Vice President
----------------------------------
Commitment Lending Office
Percentage: AmSouth Bank of Alabama
1900 5th Avenue North
11.1111% 9th Floor
Birmingham, Alabama 35203
Attention: Rebecca Shuler
Telecopier number: 205-326-4075
Confirmation number: 205-581-7266
GUARANTY FEDERAL BANK, F.S.B.
Commitment:
By: /s/ Richard Thompson
----------------------------------
$20,000,000 Title: Vice President
----------------------------------
Commitment Lending Office
Percentage: Guaranty Federal Bank, F.S.B.
8333 Douglas
8.8889% Dallas, Texas 75225
Attention: Roger Davis
Telecopier number: 214-360-8910
Confirmation number: 214-360-2849
with a copy of all notices to:
Guaranty Federal Bank, F.S.B.
8333 Douglas Avenue
Dallas, Texas 75225
Attention: Commercial Real Estate
Lending Division
Telecopier number: 214-360-1661
Confirmation number: 214-360-2849
TOTAL COMMITMENTS:
$225,000,000
<PAGE>
EXHIBIT I
GUARANTY
THIS GUARANTY (this "Guaranty") is made as of May 13, 1998, by GABLES GP,
INC., a Texas corporation, GABLES RESIDENTIAL TRUST, a Maryland Trust and
GABLES-TENNESSEE PROPERTIES, a Tennessee general partnership (each a
"Guarantor", and collectively, the "Guarantors", which terms shall include any
subsidiary of Gables Realty Limited Partnership which becomes a Guarantor
pursuant to Section 15 hereof and Section 5.23 of the Credit Agreement referred
to below) in favor of the Administrative Agent, for the ratable benefit of the
Banks, under the Credit Agreement referred to below;
W I T N E S S E T H
WHEREAS, GABLES REALTY LIMITED PARTNERSHIP, a Delaware limited partnership
(the "Borrower"), WACHOVIA BANK, N.A., as Administrative Agent (the
"Administrative Agent"), First Union National Bank, as Syndications Agent, Chase
Bank of Texas, National Association, as Documentation Agent, and certain other
Banks from time to time party thereto have entered into a certain Credit
Agreement dated as of even date herewith (as it may be amended or modified
further from time to time, the "Credit Agreement"), providing, subject to the
terms and conditions thereof, for extensions of credit to be made by the Banks
to the Borrower which will the benefit the Guarantors;
WHEREAS, it is required by Section 3.01(b) of the Credit Agreement, that
the Guarantors execute and deliver this Guaranty whereby the Guarantors shall
guarantee the payment when due of all principal, interest and other amounts that
shall be at any time payable by the Borrower under the Credit Agreement, the
Notes and the other Loan Documents; and
WHEREAS, in consideration of the financial and other support that the
Borrower has provided, and such financial and other support as the Borrower may
in the future provide, to the Guarantors, whether directly or indirectly, and in
<PAGE>
order to induce the Banks and the Administrative Agent to enter into the Credit
Agreement, the Guarantors are willing to guarantee the obligations of the
Borrower under the Credit Agreement, the Notes, and the other Loan Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Guarantors incorporate
herein by reference as fully as if set forth herein all of the representations
and warranties pertaining to the Guarantors contained in Article V of the Credit
Agreement (which representations and warranties shall be deemed to have been
renewed by the Guarantors upon each Borrowing under the Credit Agreement).
SECTION 3. COVENANTS. The Guarantors covenant that, so long as any Bank has
any Commitment outstanding under the Credit Agreement or any amount payable
under the Credit Agreement or any Note shall remain unpaid, the Guarantors will
fully comply with those covenants set forth in Article VI of the Credit
Agreement pertaining to the Guarantors, and the Guarantors incorporate herein by
reference as fully as if set forth herein all of such covenants.
SECTION 4. THE GUARANTY. The Guarantors hereby unconditionally and jointly
and severally guarantee (i) the full and punctual payment (whether at stated
maturity, upon acceleration or otherwise) of the principal of and interest on
each Note issued by the Borrower pursuant to the Credit Agreement, and the full
and punctual payment of all other amounts payable by the Borrower under the
Credit Agreement, including, without limitation, all Syndicated Loans and Money
Market Loans and interest thereon, all compensation and indemnification amounts
and fees payable pursuant to the Credit Agreement and the Administrative Agent's
Letter Agreement, and (ii) the timely performance of all other obligations of
the Borrower under the Credit Agreement and the other Loan Documents (all of the
foregoing obligations being referred to collectively as the "Guaranteed
Obligations"). Upon failure by the Borrower to pay punctually any such amount or
<PAGE>
perform such obligations, each of the Guarantors agrees that it shall forthwith
on demand pay the amount not so paid at the place and in the manner specified in
the Credit Agreement, the relevant Note or the relevant Loan Document, as the
case may be, or perform such obligation in accordance with the terms and
conditions therefor specified in the Credit Agreement or the other Loan
Documents, and pay all costs of collection, including reasonable attorneys fees;
provided that, notwithstanding the provisions of O.C.G.A.13-1-11(a)(2) to the
contrary, the Guarantor shall not be obligated to pay more than the attorneys
fees actually incurred in connection with such collection.
SECTION 5. GUARANTY UNCONDITIONAL. The obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Borrower under the Credit Agreement,
any Note, or any other Loan Document, by operation of law or otherwise or
any obligation of any other guarantor of any of the Guaranteed Obligations;
(ii) any modification or amendment of or supplement to the Credit
Agreement, any Note, or any other Loan Document;
(iii) any release, nonperfection or invalidity of any direct or
indirect security, if any, for any obligation of the Borrower under the
Credit Agreement, any Note, any Loan Document, or any obligations of any
other guarantor of any of the Guaranteed Obligations;
<PAGE>
(iv) any change in the partnership structure or ownership of the
Borrower or corporate structure or ownership of any other Guarantor or any
other guarantor of any of the Guaranteed Obligations, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the
Borrower, or any other Guarantor or any other guarantor of the Guaranteed
Obligations, or its assets or any resulting release or discharge of any
obligation of the Borrower, or any other Guarantor or any other guarantor
of any of the Guaranteed Obligations;
(v) the existence of any claim, setoff or other rights which the
Guarantors may have at any time against the Borrower, any other Guarantor
or any other guarantor of any of the Guaranteed Obligations, the
Administrative Agent, any Bank or any other Person, whether in connection
herewith or any unrelated transactions, provided that nothing herein shall
prevent the assertion of any such claim by separate suit or compulsory
counterclaim;
(vi) any invalidity or unenforceability relating to or against the
Borrower, or any other Guarantor or any other guarantor of any of the
Guaranteed Obligations, for any reason related to the Credit Agreement, any
other Loan Document, or any other Guaranty, or any provision of applicable
law or regulation purporting to prohibit the payment by the Borrower, or
any other Guarantor or any other guarantor of the Guaranteed Obligations,
of the principal of or interest on any Note or any other amount payable by
the Borrower under the Credit Agreement, the Notes, or any other Loan
Document; or
(vii) any other act or omission to act or delay of any kind by the
Borrower, any other Guarantor or any other guarantor of the Guaranteed
Obligations, the Administrative Agent, any Bank or any other Person or any
other circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the Guarantor's
obligations hereunder.
<PAGE>
SECTION 6. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. The Guarantors' obligations hereunder shall remain in full force
and effect until all Guaranteed Obligations shall have been paid in full and the
Commitments under the Credit Agreement shall have terminated or expired. If at
any time any payment of the principal of or interest on any Note or any other
amount payable by the Borrower under the Credit Agreement or any other Loan
Document is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of the Borrower or otherwise, the
Guarantors' obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
SECTION 7. WAIVER OF NOTICE BY THE GUARANTORS. The Guarantors irrevocably
waive acceptance hereof, presentment, demand, protest and, to the fullest extent
permitted by law, any notice not provided for herein, as well as any requirement
that at any time any action be taken by any Person against the Borrower, any
other Guarantor or any other guarantor of the Guaranteed Obligations, or any
other Person.
SECTION 8. STAY OF ACCELERATION. If acceleration of the time for payment of
any amount payable by the Borrower under the Credit Agreement, any Note or any
other Loan Document is stayed upon the insolvency, bankruptcy or reorganization
of the Borrower, all such amounts otherwise subject to acceleration under the
terms of the Credit Agreement, any Note or any other Loan Document shall
nonetheless be payable by the Guarantors hereunder forthwith on demand by the
Administrative Agent made at the request of the Required Banks.
SECTION 9. NOTICES. All notices, requests and other communications to any
party hereunder shall be given or made by telecopier or other writing and
telecopied or mailed or delivered to the intended recipient at its address or
telecopier number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for such purpose by
notice to the Administrative Agent in accordance with the provisions of Section
8.01 of the Credit Agreement. Except as otherwise provided in this Guaranty, all
such communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice, 3
Domestic Business Days after such communication is deposited in the mails with
first class postage prepaid, in each case given or addressed as aforesaid.
<PAGE>
SECTION 10. NO WAIVERS. No failure or delay by the Administrative Agent or
any Banks in exercising any right, power or privilege hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided in this Guaranty, the Credit
Agreement, the Notes, and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 11. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit of the
Administrative Agent and the Banks and their respective successors and assigns
and in the event of an assignment of any amounts payable under the Credit
Agreement, the Notes, or the other Loan Documents, the rights hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty may not be assigned by the Guarantors without the
prior written consent of the Administrative Agent and the Required Banks, and
shall be binding upon the Guarantors and their respective successors and
permitted assigns.
SECTION 12. CHANGES IN WRITING. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by the Guarantors and the Administrative Agent, with the consent
of the Required Banks.
<PAGE>
SECTION 13. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF GEORGIA. EACH OF THE GUARANTOR AND THE Administrative Agent
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT
SITTING IN ATLANTA, GEORGIA AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE
GUARANTORS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE GUARANTORS AND THE Administrative Agent HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 14. TAXES, ETC. All payments required to be made by the Guarantor
hereunder shall be made without setoff or counterclaim and free and clear of and
without deduction or withholding for or on account of, any present or future
taxes, levies, imposts, duties or other charges of whatsoever nature imposed by
any government or any political or taxing authority pursuant and subject to the
provisions of Section 2.11(c) of the Credit Agreement, the terms of which are
incorporated herein by reference as to the Guarantors as fully as if set forth
herein, and for such purposes, the rights and obligations of the Borrower under
such Section shall devolve to the Guarantors as to payments required to be made
by the Guarantors hereunder.
SECTION 15. ADDITIONAL GUARANTORS; RELEASE OF GUARANTORS. Section 5.23 of
the Credit Agreement provides that Significant Subsidiaries must become
Guarantors, and Subsidiaries which are not Significant Subsidiaries may elect to
become Guarantors, by, among other things, executing and delivering to the
Administrative Agent a counterpart of this Guaranty. Any Subsidiary which
executes and delivers to the Administrative Agent a counterpart of this Guaranty
shall be a Guarantor for all purposes hereunder. Under certain circumstances
described in the last sentence of Section 5.11 of the Credit Agreement,
Subsidiaries which are not Significant Subsidiaries may obtain from the
<PAGE>
Administrative Agent a written release from this Guaranty pursuant to the
provisions of such sentence, and upon obtaining such written release, any such
Subsidiary shall no longer be a Guarantor hereunder. Each other Guarantor
consents and agrees to any such release and agrees that no such release shall
affect its obligations hereunder.
SECTION 16. OTHER WAIVERS BY THE GUARANTORS. The Guarantors hereby
expressly waive, renounce, and agree not to assert, any right, claim or cause of
action, including, without limitation, a claim for reimbursement, subrogation,
indemnification or otherwise, against the Borrower arising out of or by reason
of this Guaranty or the obligations of the Guarantors hereunder, including,
without limitation, the payment or securing or purchasing of any of the
Guaranteed Obligations by the Guarantors. The waiver, renunciation and agreement
contained in the immediately preceding sentence is for the benefit of the
Administrative Agent and the Banks and also for the benefit of the Borrower who
may assert the benefits thereof as a third-party beneficiary, and the Guarantors
may be released from such waiver, renunciation and agreement only by the
execution and delivery, by the Administrative Agent, the Required Banks and the
Borrower, of an instrument expressly releasing the Guarantors therefrom.
<PAGE>
IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be duly
executed, under seal, by its authorized officer as of the date first above
written.
GABLES GP, INC.
By: /s/ Marvin R. Banks, Jr.
--------------------------
Marvin R. Banks, Jr., Vice
President
Address:
c/o Gables Realty Limited
Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
GABLES RESIDENTIAL TRUST
By: /s/ Marvin R. Banks, Jr.
-----------------------------
Title: Senior Vice President
-----------------------------
Address:
c/o Gables Realty Limited
Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
GABLES-TENNESSEE PROPERTIES
By: Gables Realty Limited
Partnership, a general partner
By Gables GP, Inc., its general
partner
By: /s/ Marvin R. Banks, Jr.
-----------------------------
Marvin R. Banks, Jr., Vice
President
Address:
Gables Realty Limited Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
<PAGE>
EXHIBIT J
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of May
13, 1998 by and between GABLES REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Principal"), GABLES GP, INC., a Texas corporation, and
GABLES-TENNESSEE PROPERTIES, a Tennessee general partnership (collectively, the
"Subsidiary Guarantors" and, together with any subsidiary of the Principal which
becomes a Guarantor pursuant to the last paragraph hereof, Section 15 of the
Guaranty referred to below and Section 5.23 of the Credit Agreement referred to
below). The Principal and each of the Subsidiary Guarantors are sometimes
hereinafter referred to individually as a "Contributing Party" and collectively
as the "Contributing Parties").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Amended and Restated Credit Agreement,
dated as of even date herewith among the Principal, the Banks party thereto and
Wachovia Bank, N.A., as Administrative Agent, First Union National Bank, as
Syndication Agent, Chase Bank of Texas, National Association, as Documentation
Agent, and certain other Banks from time to time party thereto (such agreement,
as the same may from time to time be amended, modified, restated or extended,
being hereinafter referred to as the "Credit Agreement"; capitalized terms used
herein shall have the meanings ascribed thereto in the Credit Agreement), the
Banks have agreed to extend financial accommodations to the Principal;
WHEREAS, as a condition, among others, to the willingness of the
Administrative Agent and the Banks to enter into the Credit Agreement, they have
required that each Subsidiary Guarantor, along with Gables Residential Trust
("GBP"), execute and deliver that certain Guaranty, dated as of even date
herewith (such agreement, as the same may from time to time be amended,
modified, restated or extended, being hereinafter referred to as the
"Guaranty"), pursuant to which, among other things, the Subsidiary Guarantors
and GBP have jointly and severally agreed to guarantee the "Guaranteed
Obligations" (as defined in the Guaranty); and
<PAGE>
WHEREAS, each Subsidiary Guarantor is a direct or indirect subsidiary of
the Principal and is engaged in businesses related to those of the Principal and
each other Subsidiary Guarantor, and each of the Subsidiary Guarantors will
derive direct or indirect economic benefit from the effectiveness and existence
of the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce each Subsidiary Guarantor to enter into the
Guaranty, it is agreed as follows:
To the extent that any Subsidiary Guarantor shall, under the Guaranty, make
a payment (a "Subsidiary Guarantor Payment") of a portion of the Guaranteed
Obligations, then, without limiting its rights of subrogation against the
principal, such Subsidiary Guarantor shall be entitled to contribution and
indemnification from, and be reimbursed by, each of the other Contributing
Parties in an amount, for each such Contributing Party, equal to a fraction of
such Subsidiary Guarantor Payment, the numerator of which fraction is such
Contributing Party's Allocable Amount and the denominator of which is the sum of
the Allocable Amounts of all of the Contributing Parties.
As of any date of determination, the "Allocable Amount" of each
Contributing Party shall be equal to the maximum amount of liability which could
be asserted against such Contributing Party hereunder with respect to the
applicable Subsidiary Guarantor Payment without (i) rendering such Contributing
Party "insolvent" within the meaning of Section 101(31) of the Federal
Bankruptcy Code (the "Bankruptcy Code") or Section 2 of either the Uniform
Fraudulent Transfer Act (the "UFTA") or the Uniform Fraudulent Conveyance Act
(the "UFCA"), (ii) leaving such Contributing Party with unreasonably small
capital, within the meaning of Section 548 of the Bankruptcy Code or Section 4
of the UFTA or Section 5 of the UFCA, or (iii) leaving such Contributing Party
unable to pay its debts as they become due within the meaning of Section 548 of
the Bankruptcy Code or Section 4 of the UFTA or Section 6 of the UFCA.
This Agreement is intended only to define the relative rights of the
Contributing Parties, and nothing set forth in this Agreement is intended to or
shall impair the obligations of the Subsidiary Guarantors, jointly and
severally, to pay any amounts, as and when the same shall become due and payable
in accordance with the terms of the Guaranty.
<PAGE>
The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets in favor of each Subsidiary
Guarantor to which such contribution and indemnification is owing.
This Agreement shall become effective upon its execution by each of the
Contributing Parties and shall continue in full force and effect and may not be
terminated or otherwise revoked by any Contributing Party until all of the
Guaranteed Obligations shall have been indefeasibly paid in full (in lawful
money of the United States of America) and discharged and the Credit Agreement
and financing arrangements evidenced and governed by the Credit Agreement shall
have been terminated. Each Contributing Party agrees that if, notwithstanding
the foregoing, such Contributing Party shall have any right under applicable law
to terminate or revoke this Agreement, and such Contributing Party shall attempt
to exercise such right, then such termination or revocation shall not be
effective until a written notice of such revocation or termination, specifically
referring hereto and signed by such Contributing Party, is actually received by
each of the other Contributing Parties and by the Administrative Agent at its
notice address set forth in the Credit Agreement. Such notice shall not affect
the right or power of any Contributing Party to enforce rights arising prior to
receipt of such written notice by each of the other Contributing Parties and the
Administrative Agent. If any Bank grants additional loans to the Principal or
takes other action giving rise to additional Guaranteed Obligations after any
Contributing Party has exercised any right to terminate or revoke this Agreement
but before the Administrative Agent receives such written notice, the rights of
each other Contributing Party to contribution and indemnification hereunder in
connection with any Subsidiary Guarantor Payments made with respect to such
loans or Guaranteed Obligations shall be the same as if such termination or
revocation had not occurred.
Section 5.23 of the Credit Agreement provides that Significant Subsidiaries
must become Guarantors, and Subsidiaries which are not Significant Subsidiaries
may elect to become Guarantors, by, among other things, executing and delivering
to the Administrative Agent a counterpart of the Guaranty and of this
Contribution Agreement. Any Subsidiary which executes and delivers to the
Administrative Agent a counterpart of the Guaranty and of this Contribution
Agreement shall be a Subsidiary Guarantor for all purposes hereunder. Under
certain circumstances described in the last sentence of Section 5.11 of the
Credit Agreement, Subsidiaries which are not Significant Subsidiaries may obtain
from the Administrative Agent a written release from the Guaranty pursuant to
the provisions of such sentence, and upon obtaining such written release, any
such Subsidiary shall no longer be a Subsidiary Guarantor or Contributing Party
hereunder, and such release shall automatically and without further action
constitute a release by each other Contributing Party of all obligations of such
Subsidiary hereunder. Each other Subsidiary Guarantor consents and agrees to any
such release and agrees that no such release shall affect its obligations
hereunder, except as to the Subsidiary so released.
<PAGE>
IN WITNESS WHEREOF, each Contributing Party has executed and delivered this
Agreement, under seal, as of the date first above written.
GABLES REALTY LIMITED PARTNERSHIP
By: Gables GP, Inc., its sole
general partner
By: /s/ Marvin R. Banks, Jr.
------------------------------
Marvin R. Banks, Jr., Vice
President
Gables Realty Limited Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
GABLES GP, INC.
By: /s/ Marvin R. Banks, Jr.
-----------------------------
Marvin R. Banks, Jr., Vice
President
Address:
Gables Realty Limited Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
<PAGE>
GABLES-TENNESSEE PROPERTIES
By: Gables Realty Limited
Partnership, a general partner
By Gables GP, Inc., its general
partner
By: /s/ Marvin R. Banks, Jr.
------------------------------
Marvin R. Banks, Jr., Vice
President
Address:
Gables Realty Limited Partnership
2859 Paces Ferry Road
Suite 1450
Atlanta, Georgia 30339
Attention: Marvin R. Banks, Jr.
Telecopier number: 770-438-5559
Confirmation number: 770-438-5501
FORWARD TREASURY LOCK AGREEMENT
Amended on May 28, 1998
WHEREAS, Gables Realty Limited Partnership ("Counterparty") wishes to defer
the fixing of the effective cost to it of its financings based on current
interest rates and J.P. Morgan Securities Inc. ("JPMS"), is willing to enter
into this Forward Treasury Lock Agreement, dated as of September 22, 1997 and
amended on May 28, 1998 to enable Counterparty to do so.
NOW, THEREFORE, Counterparty and JPMS hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
following meanings:
(a) This "Agreement" shall mean this Forward Treasury Lock Agreement.
(b) The "Determination Date" shall mean the day specified below opposite
the term "Determination Date". JPMS may, upon written notice to and
with the consent of Counterparty, change the Determination Date.
Counterparty may also, upon written notice to and with consent of
JPMS, change the Determination Date.
(c) The "Notional Principal" shall mean that amount specified below
opposite the term "Notional Principal".
(d) The "Offer Price" for the Reference Treasury on any day shall mean the
spot "offer" price for the Reference Treasury less JPMS' hedging
costs, expressed as a percentage, all as determined by JPMS in its
reasonable good faith judgment.
(e) The "Payment Amount" on any day shall mean an amount equal to the
product of (i) the difference of the Reference Price minus the Offer
Price for the Reference Treasury on such day multiplied by (ii) the
Notional Principal.
(f) The "Reference Price" for the Reference Treasury shall mean that
price, expressed as a percentage, specified below opposite the term
"Reference Price".
(g) The "Reference Treasury" shall mean the United States Treasury Bill or
Note having the interest rate and maturity specified below opposite
the term "Reference Treasury".
(h) The "Settlement Date" shall mean the day specified below opposite the
term "Settlement Date".
2. Payment . The parties hereto agree that on the Settlement Date a payment
shall be made equal to the Payment Amount on the Determination Date. If the
Payment Amount is a positive number, Counterparty shall pay the Payment
Amount to JPMS. If such Payment Amount is a negative number, JPMS shall pay
the absolute value of such Payment Amount to Counterparty.
3. Default; Set-off. In the event a party (the "Defaulting Party") shall (i)
fail to make the payment due to Section 2 hereof, or (ii) have an Act of
Insolvency (as defined below) occur in respect of it, the other party (the
"Non-Defaulting Party") shall have the right, without notice or demand of
any kind, to (A) set-off and apply to such Defaulting Party's obligations
all property of the Defaulting Party held by the Non-Defaulting Party and
all liabilities of and amounts owed by the Non-Defaulting Party to the
Defaulting Party, whether matured or unmatured, and whether arising
hereunder or under any other agreement or transaction between the parties,
and (B) in the case of an Act of Insolvency, establish a Determination Date
as of the date of default in which case the Payment Amount shall be
immediately payable. The Defaulting Party shall be liable to the
Non-Defaulting Party for the Payment
<PAGE>
Amount and the amount of all reasonable legal and other professional
expenses incurred by the Non-Defaulting Party in connection with or as a
consequence of an Event of Default, together with interest thereon at LIBOR
plus 2%.
"Act of Insolvency", with respect to any party, shall mean (i) the
commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, moratorium,
dissolution, delinquency or similar law, or such party seeking the
appointment or election of a receiver, conservator, trustee, custodian or
similar official for such party or any substantial part of its property, or
the convening of any meeting of creditors for the purpose of commencing any
such case or proceeding or seeking such an appointment or election, (ii)
the commencement of any such case or proceeding against such party, or
another seeking such an appointment or election, or the filing against a
party of an application for a protective decree under the provisions of the
Securities Investor Protection Act of 1970, which (a) is consented to or
not timely contested by such party, (b) results in the entry of an order
for relief, such an appointment or election, the issuance of such
protective decree or the entry of an order having a similar effect, or (c)
is not dismissed within 15 days, (iii) the making by a party of a general
assignment for the benefit of creditors, or (iv) the admission in writing
by a party of such party's inability to pay such party's debts as they
become due.
4. No Assignment. The Counterparty may not, without prior written consent of
JPMS, assign, transfer or set over to another, in whole or in part, any or
all of its benefits, rights, duties and obligations under this Agreement,
and any such purported assignment shall be null and void.
5. Early Termination by Agreement. At any time, either party shall have the
right by notice to the other to request that the parties negotiate with
respect to the termination of this Agreement. In such case, the parties
shall promptly negotiate in good faith with respect to an early termination
date and the amount, if any, payable by one party to the other, as the case
may be, in satisfaction for such early termination. Any such early
termination and all terms thereof shall be subject to the mutual agreement
of the parties, and each party shall have complete and unfettered
discretion as to its agreement to a proposed termination.
6. Counterparts. This Agreement may be executed in counterparts, each of which
will be deemed an original.
7. Governing Law and Jurisdiction. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without
reference to choice of law doctrines. This Agreement, including settlement
and delivery, shall be subject to the rules and regulations of the
appropriate self-regulatory organizations and the federal and state
securities laws.
8. Miscellaneous. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and
supercedes all oral communication and prior writings with respect thereto.
No amendment, modification or waiver in respect of this Agreement will be
effective unless in writing and executed by each of the parties or
confirmed by an exchange of any rights, powers, remedies and privileges
provided by law. A failure or delay in exercising any right, power or
privilege will not be presumed to preclude any subsequent or further
exercise of any other right, power or privilege. The headings used in this
Agreement are for convenience of reference only and are not to affect the
construction of or to be taken into consideration in interpreting this
Agreement. Should any part of this Agreement be held void and unenforceable
it shall not affect any other part of this Agreement.
<PAGE>
Reference Treasury: 7 7/8% of November 15, 2004
Notional Principal: USD 50,000,000
Agreement Date: September 22, 1997
Amendment Date: May 28, 1998
Determination Date: July 28, 1998
Settlement Date: July 29, 1998
Reference Yield: 6.21699%
Reference Price: 108 - 16 +
The Office of JPMS for this transaction is:
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
For Treasury Lock information only:
Facsimile Transmission Number: (212)-648-5088
Telephone Number: (212) 648-7004
Attention: Irina Gartsbeyn
If you are in agreement with the foregoing, please complete the signature line
below and return one copy to us.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date specified on the first
page of this Agreement.
Gables Realty Limited Partnership J.P. MORGAN SECURITIES, INC.
By: /s/ Marvin R. Banks, Jr. By: /s/ Rajan Kundra
----------------------------- ---------------------------
Name: Marvin R. Banks, Jr. Name: Rajan Kundra
Title: Senior Vice President Title: Associate
Address: 2859 Paces Ferry Rd. Address: 60 Wall Street
Suite 1450 New York, NY 10260
Atlanta, GA 30339
FORWARD TREASURY LOCK AGREEMENT
-------------------------------
Amended on July 24, 1998
The purpose of this letter is to confirm the terms and conditions of the Forward
Treasury Lock Transaction entered into between J.P. Morgan Securities Inc.
("JPMSI") and Gables Realty Limited Partnership (the "Counterparty") on the
Trade Date specified below (the "Transaction"). This Confirmation evidences a
complete binding agreement between you and us as to the terms of the Transaction
to which this Confirmation relates. This Confirmation, together with all other
documents referring to the ISDA Form of Master Agreement (Multicurrency-Cross
Border)(the "ISDA Form")(each a "Confirmation") confirming transactions (the
"Transactions") entered into between us (notwithstanding anything to the
contrary in a Confirmation), shall supplement, form a part of, and be subject to
an agreement in the form of the ISDA Form as if we had executed an agreement in
such a form (but without any Schedule) on the Trade Date of the first such
Transaction between us. In the event of any inconsistency between the provisions
of that agreement and this Confirmation, this Confirmation will prevail for the
purpose of this Transaction.
Each party represents that (i) it is entering into the Transaction evidenced
hereby as principal (and not as agent or in any other capacity); (ii) the other
party is not acting as fiduciary for it; (iii) it is not relying upon any
representations except those expressly set forth in the ISDA Form or this
Confirmation; (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial, and accounting advisors to the extent it has
deemed necessary, and it has made its own investment, hedging, and trading
decisions based upon its own judgment and upon any advise from such advisors as
it has deemed necessary and not upon any view expressed by the other party; and
(v) it is entering into this Transaction with a full understanding of the terms,
conditions and risks thereof and it is capable of and willing to assume those
risks.
The terms of the Transaction to which this Confirmation relates is as follows:
1. PAYMENT. The parties hereto agree that on the Settlement Date a payment
shall be made equal to the Payment Amount on the Determination Date. If the
Payment Amount is a positive number, JPMSI shall pay the Payment Amount to
the Counterparty. If the Payment Amount is a negative number, Counterparty
shall pay the absolute value of the Payment Amount to JPMSI.
2. DETERMINATION OF PAYMENT AMOUNT. On or before the Determination Date, the
Counterparty shall contact JPMSI between 9:00 a.m. and 3:00 p.m. (Eastern
time), and the Counterparty and JPMSI shall at such time agree on a time on
such date (the "Lock Time") for determining the Payment Amount. JPMSI shall
then determine the Payment Amount as of the Lock Time, and shall notify the
Counterparty thereof by close of business on such date. If the Counterparty
has not notified JPMSI by 3:00 p.m. (Eastern time) on the Determination
Date in order to set a Lock Time, the Lock Time shall be 3:00 p.m. (Eastern
time) on the Determination Date. All determinations hereunder shall be made
by JPMSI in good faith and in accordance with its standard practices in the
Determination Date and as of the Lock Time.
<PAGE>
3. DEFINITIONS
As used herein, the following terms shall have the following meaning:
Trade Date: September 22, 1997
Amendment Date: July 24, 1998
Reference Treasury: 7 7/8% of November 15, 2004
Notional Amount: USD 50,000,000.00
Reference Price: 108 - 10
Reference Yield: 6.240%
The "Offer Price" for the Reference Treasury on any day shall mean the
spot "offer" price for the Reference Treasury, expressed as a
percentage, as determined by JPMSI in its reasonable good faith
judgment.
The "Payment Amount" on any day shall mean an amount equal to the
product of (i) the difference between the Reference Price minus the
Offer Price on such day multiplied by (ii) the Notional Amount.
Determination Date: August 21, 1998
Settlement Date: August 24, 1998
Governing Law: New York
<PAGE>
Each party hereby agrees to make payments to the other in accordance with this
Confirmation and the ISDA Form. Please confirm your agreement to be bound by the
terms of the foregoing by executing this facsimile of this Confirmation and
returning it to us. Please send to the attention of Irina Gartsbeyn (Telephone
Number:, Facsimile Number:). When referencing this Confirmation, please
indicate: JPMSI Treasury Lock Transaction #000114.
We are very pleased to have executed this transaction with Gables Realty Limited
Partnership.
With kind regards, Accepted and Confirmed as of the date
first above written
J.P. MORGAN SECURITIES, INC. GABLES REALTY LIMITED PARTNERSHIP
BY: /s/ Jason Manske BY: /s/ Marvin R. Banks, Jr.
--------------------------------- --------------------------------
Name: Jason Manske Name: Marvin R. Banks, Jr.
Title:Vice President Title:Senior Vice President
GABLES RESIDENTIAL TRUST
THIRD AMENDED AND RESTATED 1994 SHARE OPTION AND INCENTIVE PLAN *
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Gables Residential Trust 1994 Share Option and
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable
the officers, employees and Trustees of Gables Residential Trust (the "Company")
and its Subsidiaries upon whose judgment, initiative and efforts the Company
largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Share Options, Non-Qualified Share
Options, Restricted Share Awards and Unrestricted Share Awards.
"Board" means the Board of Trustees of the Company.
"Cause" means and shall be limited to a vote of the Board of Trustees
resolving that the participant should be dismissed as a result of (i) any
material breach by the participant of any agreement to which the participant and
the Company are parties, (ii) any act (other than retirement) or omission to act
by the participant which may have a material and adverse effect on the business
of the Company or any Subsidiary or on the participant's ability to perform
services for the Company or any Subsidiary, including, without limitation, the
commission of any crime (other than ordinary traffic violations), or (iii) any
material misconduct or neglect of duties by the participant in connection with
the business or affairs of the Company or any Subsidiary.
"Change of Control" is defined in Section 12.
- ------------------------------
* The 1994 Share Option and Incentive Plan was approved by the Board of
Trustees and the shareholders on January 19, 1994; the first amendment
thereto was approved by the Board of Trustees at a Meeting of the Board of
Trustees on February 20, 1995 and by the shareholders at the 1995 Annual
Meeting of Shareholders on May 16, 1995; the second amendment thereto was
approved by the Board of Trustees at a Meeting of the Board of Trustees on
February 6, 1996 and by the shareholders at the 1996 Annual Meeting of
Shareholders on May 14, 1996. At a meeting of the Board of Trustees on
December 11, 1996, the Board of Trustees adopted Amendment No. 1 to the
Second Amended and Restated 1994 Share Option and Incentive Plan. The Third
Amended and Restated 1994 Share Option and Incentive Plan was approved by
the Board of Trustees by a Unanimous Written Consent in Lieu of a Meeting
dated March 16, 1998 and by the shareholders at the 1998 Annual Meeting of
Shareholders on May 19, 1998.
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Board or any Committee of the Board referred to in
Section 2.
"Disability" means disability as set forth in Section 22(e)(3) of the Code.
"Disinterested Person" means an Independent Trustee who qualifies as such
under Rule 16b-3(c)(2)(i) promulgated under the Act, or any successor definition
under the Act.
"Effective Date" means the date on which the Plan is approved by
shareholders as set forth in Section 14.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related rules, regulations and interpretations.
"Fair Market Value" on any given date means the last reported sale price at
which the Shares are traded on such date or, if no Shares are traded on such
date, the most recent date on which the Shares were traded, as reflected on the
New York Stock Exchange or, if applicable, any other national stock exchange on
which the Shares are traded. Notwithstanding the foregoing, the Fair Market
Value on the first day of the Company's initial public offering shall mean the
initial public price.
"Incentive Share Option" means any Share Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
"Independent Trustee" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"Non-Qualified Share Option" means any Share Option that is not an
Incentive Share Option.
"Option" or "Share Option" means any option to purchase Shares granted
pursuant to Section 5.
"Restricted Share Award" means Awards granted pursuant to Section 6.
"Share" or "Shares" means one or more, respectively, of the Common Shares
of beneficial interest, par value $.01 per share, of the Company, subject to
adjustments pursuant to Section 3.
"Subsidiary" means Gables Realty Limited Partnership, Central Apartment
Management, Inc., East Apartment Management, Inc., Gables Central Construction,
Inc., and Gables East Construction, Inc., and any corporation or other entity
(other than the Company) in any unbroken chain of corporations or other
entities, beginning with the Company if each of the corporations or entities
(other than the last corporation or entity in the unbroken chain) owns stock or
other interests possessing 50% or more of the economic interest or the total
combined voting power of all classes of stock or other interests in one of the
other corporations or entities in the chain.
"Unit" or "Units" means a unit or units of limited partnership interest in
Gables Realty Limited Partnership, a Delaware limited partnership and the entity
through which the Company principally conducts its business.
"Unrestricted Share Award" means Awards granted pursuant to Section 7.
<PAGE>
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
AND DETERMINE AWARDS
--------------------------------------------------------------------
(a) COMMITTEE. Prior to the closing of the Company's initial public
offering and the appointment of the Independent Trustees, the Plan shall be
administered by the Board. After the closing of the Company's initial public
offering and the appointment of the Independent Trustees, the Plan shall be
administered by all of the Independent Trustee members of the Compensation
Committee of the Board, or any other committee of not less than two Independent
Trustees performing similar functions, as appointed by the Board from time to
time. Each member of the Committee shall be a Disinterested Person after the
date of the closing of the Company's initial public offering.
(b) POWERS OF COMMITTEE. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:
(i) to select the officers and other employees of the Company and
its Subsidiaries to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if
any, of Incentive Share Options, Non-Qualified Share Options,
Restricted Share Awards and Unrestricted Share Awards, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of Shares to be covered by any
Award;
(iv) to determine and modify the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any
Award, which terms and conditions may differ among individual Awards
and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate the exercisability or vesting of all or any
portion of any Award;
(vi) subject to the provisions of Section 5(a)(iii), to extend
the period in which Share Options may be exercised;
(vii) to determine whether, to what extent, and under what
circumstances Shares and other amounts payable with respect to an
Award shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or
credit amounts constituting interest (at rates determined by the
Committee) or dividends or deemed dividends on such deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in
connection with the Plan; and to otherwise supervise the
administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
<PAGE>
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
-----------------------------------------------------
(a) SHARES ISSUABLE. At any time, the maximum number of Shares issued or
available for issuance under the Plan shall be 9% of the sum of (i) the total
number of Shares outstanding at such time (which limit shall be determined
without considering as outstanding any Shares that are the subject of any
unexercised options under the Plan or any other option plan of the Company or
any Shares owned by the Company or any of its subsidiaries) and (ii) the total
number of Shares issuable upon the exchange of Units that are outstanding at
such time (other than Units owned by the Company or any of its subsidiaries);
provided, however, that the maximum number of Shares for which Incentive Share
Options may be granted under the Plan shall not exceed 2,622,860 Shares (which
number represents 9% of such sum as of May 19, 1998 and which number is subject
to adjustment as provided in paragraph (b) below); provided, further, that at
any time the total number of Shares issued or available for issuance under the
Plan in respect of Restricted Share Awards or Unrestricted Share Awards shall
not exceed 50% of the total number of Shares available for issuance under the
Plan at such time; provided, further, that the number of Shares for which Share
Options may be granted to any one individual participant during any one calendar
year period shall be limited to 200,000 Shares. The Shares underlying any Awards
which are forfeited, cancelled, reacquired by the Company, satisfied without the
issuance of Shares or otherwise terminated (other than by exercise) shall be
added back to the Shares available for issuance under the Plan. Shares issued
under the Plan may be authorized but unissued Shares or Shares reacquired by the
Company.
(b) SHARE DIVIDENDS, MERGERS, ETC. In the event of a share dividend, share
split or similar change in capitalization affecting the Shares, the Committee
shall make appropriate adjustments in (i) the number and kind of shares or
securities on which Awards may thereafter be granted, (ii) the number and kind
of shares remaining subject to outstanding Awards, and (iii) the option or
purchase price in respect of such shares. In the event of any merger,
consolidation, dissolution or liquidation of the Company or Gables Realty
Limited Partnership, the Committee in its sole discretion may, as to any
outstanding Awards, make such substitution or adjustment in the aggregate number
of shares reserved for issuance under the Plan and the number and purchase price
(if any) of shares subject to such Awards as it may determine and as may be
permitted by the terms of such transaction, or amend or terminate such Awards
upon such terms and conditions as it shall provide (which, in the case of the
termination of the vested portion of any Award, shall require payment or other
consideration which the Committee deems equitable in the circumstances).
(c) SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
SECTION 4. ELIGIBILITY
-----------
Participants in the Plan will be such full or part-time officers and other
employees of the Company and its Subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company and its
Subsidiaries and who are selected from time to time by the Committee, in its
sole discretion. Independent Trustees are also eligible to participate in the
Plan but only to the extent provided in Section 5(c) and Section 7 below.
<PAGE>
SECTION 5. SHARE OPTIONS
-------------
Any Share Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Share Options granted under the Plan may be either Incentive Share Options
or Non-Qualified Share Options. To the extent that any Option does not qualify
as an Incentive Share Option, it shall constitute a Non-Qualified Share Option.
No Incentive Share Option shall be granted under the Plan after May 18,
2008.
(a) SHARE OPTIONS GRANTED TO EMPLOYEES. The Committee in its discretion may
grant Share Options to employees of the Company or any Subsidiary. Share Options
granted to employees pursuant to this Section 5(a) shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:
(i) EXERCISE PRICE. The exercise price per share for the Shares
covered by a Share Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall not be less than
100% of Fair Market Value on the date of grant. Notwithstanding the
foregoing, with respect to Non-Qualified Share Options which are granted in
lieu of cash bonus, the exercise price per share shall not be less than 50%
of the Fair Market Value on the date of grant. If an employee owns or is
deemed to own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation and
an Incentive Share Option is granted to such employee, the option price of
such Incentive Share Option shall be not less than 110% of Fair Market
Value on the grant date.
(ii) GRANT OF DISCOUNT OPTIONS IN LIEU OF CASH BONUS. Upon the request
of an employee and with the consent of the Committee, such employee may
elect each calendar year to receive a Non-Qualified Share Option in lieu of
cash bonus to which he may become entitled during the following calendar
year pursuant to any other plan of the Company, but only if such employee
makes an irrevocable election to waive receipt of all or a portion of such
cash bonus. Such election shall be made on or before the date set by the
Committee which date shall be no later than 15 days preceding January 1 of
the calendar year in which the cash bonus would otherwise be paid. A
Non-Qualified Share Option shall be granted to each employee who made such
an irrevocable election on the date the waived cash bonus would otherwise
be paid; provided, however, that with respect to an employee who is subject
to Section 16 of the Act, if such grant date is not at least six months and
one day from the date of the election, the grant shall be delayed until the
date which is six months and one day from the date of the election (or the
next following business day, if such date is not a business day). The
exercise price per Share Option shall be determined by the Committee but
shall not be less than 50% of the Fair Market Value of a single Share on
the date the Share Option is granted. The number of Shares subject to the
Share Option shall be determined by dividing the amount of the waived cash
bonus by the difference between the Fair Market Value of a single Share on
the date the Share Option is granted and the exercise price per Share
Option. The Share Option shall be granted for whole number of Shares so
determined; the value of any fractional share shall be paid in cash. An
employee may revoke his election under this Section 5(a)(ii) on a
prospective basis at any time; provided, however, that with respect to an
employee who is subject to Section 16 of the Act, such revocation shall
only be effective six months and one day following the date of such
revocation.
<PAGE>
(iii) OPTION TERM. The term of each Share Option shall be fixed by the
Committee, but no Incentive Share Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation and an Incentive Share
Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.
(iv) EXERCISABILITY; RIGHTS OF A SHAREHOLDER. Share Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date; provided, however, that Share Options granted in lieu of cash bonus
shall be exercisable immediately. The Committee may at any time accelerate
the exercisability of all or any portion of any Share Option. An optionee
shall have the rights of a shareholder only as to shares acquired upon the
exercise of a Share Option and not as to unexercised Share Options.
(v) METHOD OF EXERCISE. Share Options may be exercised in whole or in
part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made
by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) In the form of Shares that are not then subject to
restrictions under any Company plan and that have been held by
the optionee for at least six months, if permitted by the
Committee in its discretion. Such surrendered Shares shall be
valued at Fair Market Value on the exercise date;
(C) By the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions
to a broker to promptly deliver to the Company cash or a check
payable and acceptable to the Company to pay the purchase price;
provided that in the event the optionee chooses to pay the
purchase price as so provided, the optionee and the broker shall
comply with such procedures and enter into such agreements of
indemnity and other agreements as the Committee shall prescribe
as a condition of such payment procedure. Payment instruments
will be received subject to collection; or
(D) By the optionee delivering to the Company a full
recourse promissory note, provided that the Board or the
Compensation Committee has (i) authorized the loan of funds to
the optionee for the purpose of enabling or assisting the
optionee to effect the exercise of the optionee's Share Options
and (ii) established the terms of such note. Such promissory note
shall, at the Company's discretion, be accompanied by a pledge
agreement of the Common Shares issued pursuant to the exercise of
such Share Options.
The delivery of certificates representing the Shares to be purchased pursuant to
the exercise of a Share Option will be contingent upon receipt from the optionee
(or a purchaser acting in his stead in accordance with the provisions of the
Share Option) by the Company of the full purchase price for such Shares and the
fulfillment of any other requirements contained in the Share Option or
applicable provisions of laws.
<PAGE>
(vi) NON-TRANSFERABILITY OF OPTIONS. No Share Option shall be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution and all Share Options shall be exercisable, during
the optionee's lifetime, only by the optionee.
(vii) TERMINATION BY REASON OF DEATH. If any optionee's employment by
the Company and its Subsidiaries terminates by reason of death, the Share
Option may thereafter be exercised, to the extent exercisable at the date
of death, by the legal representative or legatee of the optionee, for a
period of six months (or such longer period as the Committee shall specify
at any time) from the date of death, or until the expiration of the stated
term of the Option, if earlier.
(viii) TERMINATION BY REASON OF DISABILITY.
(A) Any Share Option held by an optionee whose
employment by the Company and its Subsidiaries has
terminated by reason of Disability may thereafter be
exercised, to the extent it was exercisable at the time of
such termination, for a period of twelve months (or such
longer period as the Committee shall specify at any time)
from the date of such termination of employment, or until
the expiration of the stated term of the Option, if earlier.
(B) The Committee shall have sole authority and
discretion to determine whether a participant's employment
has been terminated by reason of Disability.
(C) Except as otherwise provided by the Committee at
the time of grant, the death of an optionee during a period
provided in this Section 5(a)(viii) for the exercise of a
Non-Qualified Share Option, shall extend such period for six
months from the date of death, subject to termination on the
expiration of the stated term of the Option, if earlier.
(ix) TERMINATION FOR CAUSE. If any optionee's employment by the
Company and its Subsidiaries has been terminated for Cause, any Share
Option held by such optionee shall immediately terminate and be of no
further force and effect; provided, however, that the Committee may, in its
sole discretion, provide that such Share Option can be exercised for a
period of up to 30 days from the date of termination of employment or until
the expiration of the stated term of the Option, if earlier.
(x) OTHER TERMINATION. Unless otherwise determined by the Committee,
if an optionee's employment by the Company and its Subsidiaries terminates
for any reason other than death, Disability, or for Cause, any Share Option
held by such optionee may thereafter be exercised, to the extent it was
exercisable on the date of termination of employment, for three months (or
such longer period as the Committee shall specify at any time) from the
date of termination of employment or until the expiration of the stated
term of the Option, if earlier.
(xi) ANNUAL LIMIT ON INCENTIVE SHARE OPTIONS. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
Shares with respect to which Incentive Share Options granted under this
Plan and any other plan of the Company or its Subsidiaries become
exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000.
<PAGE>
(xii) FORM OF SETTLEMENT. Shares issued upon exercise of a Share
Option shall be free of all restrictions under the Plan, except as
otherwise provided in this Plan.
(b) RELOAD OPTIONS. At the discretion of the Committee, Options granted
under Section 5(a) may include a so-called "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of Shares in
accordance with Section 5(a)(v)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Share on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of Shares equal to the number
delivered to exercise the original Option.
(c) SHARE OPTIONS GRANTED TO INDEPENDENT TRUSTEES.
(i) AUTOMATIC GRANT OF OPTIONS. Promptly after the closing of the
Company's initial public offering and the appointment of the
Independent Trustees, each Independent Trustee shall automatically be
granted a Non-Qualified Share Option to purchase 3,000 Shares. Each
Independent Trustee who is serving as Trustee of the Company on the
fifth business day after each annual meeting of shareholders,
beginning with the 1995 annual meeting, shall automatically be granted
on such day a Non-Qualified Share Option to acquire 5,000 Shares. The
exercise price per Share for the Shares covered by a Share Option
granted pursuant to the first sentence hereof shall be equal to the
greater of the initial public offering price or the Fair Market Value
of a single Share on the date the Share Option is granted. The
exercise price per Share for the Shares covered by a Share Option
granted pursuant to the second sentence hereof shall be equal to the
Fair Market Value of a single Share on the date the Share Option is
granted.
(ii) EXERCISE; TERMINATION; NON-TRANSFERABILITY.
(A) Except as provided in Section 12, no Option granted
under Section 5(c)(i) may be exercised before the first
anniversary of the date upon which it was granted; provided,
however, that any Option so granted shall become exercisable upon
the termination of service of the Independent Trustee because of
Disability or death. No Option issued under this Section 5(c)
shall be exercisable after the expiration of ten years from the
date upon which such Option is granted.
(B) The rights of an Independent Trustee in an Option
granted under Section 5(c) shall terminate six months after such
Trustee ceases to be a Trustee of the Company or the specified
expiration date, if earlier; provided, however, that if the
Independent Trustee ceases to be a Trustee for Cause, the rights
shall terminate immediately on the date on which he ceases to be
a Trustee.
(C) No Share Option granted under this Section 5(c) shall be
transferable by the optionee otherwise than by will or by the
laws of descent and distribution, and such Options shall be
exercisable, during the optionee's lifetime only by the optionee.
Any Option granted to an Independent Trustee and outstanding on
the date of his death may be exercised by the legal
representative or legatee of the optionee for a period of six
months from the date of death or until the expiration of the
stated term of the option, if earlier.
(D) Options granted under this Section 5(c) may be exercised
only by written notice to the Company specifying the number of
Shares to be purchased. Payment of the full purchase price of the
Shares to be purchased may be made by one or more of the methods
specified in Section 5(a)(v). An optionee shall have the rights
of a shareholder only as to shares acquired upon the exercise of
a Share Option and not as to unexercised Share Options.
<PAGE>
(iii) LIMITED TO INDEPENDENT TRUSTEES. The provisions of this
Section 5(c) shall apply only to Options granted or to be granted to
Independent Trustees, and shall not be deemed to modify, limit or
otherwise apply to any other provision of this Plan or to any Option
issued under this Plan to a participant who is not an Independent
Trustee of the Company. To the extent inconsistent with the provisions
of any other Section of this Plan, the provisions of this Section 5(c)
shall govern the rights and obligations of the Company and Independent
Trustees respecting Options granted or to be granted to Independent
Trustees. The provisions of this Section 5(c) which affect the price,
date of exercisability, option period or amount of Shares under an
Option shall not be amended more than once in any six-month period,
other than to comport with changes in the Code or ERISA.
SECTION 6. RESTRICTED SHARE AWARDS
-----------------------
(a) NATURE OF RESTRICTED SHARE AWARD. The Committee may grant Restricted
Share Awards to any employee of the Company or any Subsidiary. A Restricted
Share Award is an Award entitling the recipient to acquire, at no cost or for a
purchase price determined by the Committee, Shares subject to such restrictions
and conditions as the Committee may determine at the time of grant ("Restricted
Shares"). Conditions may be based on continuing employment and/or achievement of
pre-established performance goals and objectives.
(b) ACCEPTANCE OF AWARD. A participant who is granted a Restricted Share
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within 60 days (or such shorter date as the
Committee may specify) following the award date by making payment to the
Company, if required, by certified or bank check or other instrument or form of
payment acceptable to the Committee in an amount equal to the specified purchase
price, if any, of the Shares covered by the Award and by executing and
delivering to the Company a written instrument that sets forth the terms and
conditions of the Restricted Shares in such form as the Committee shall
determine.
(c) RIGHTS AS A SHAREHOLDER. Upon complying with Section 6(b) above, a
participant shall have all the rights of a shareholder with respect to the
Restricted Shares including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained in
the written instrument evidencing the Restricted Share Award. Unless the
Committee shall otherwise determine, certificates evidencing the Restricted
Shares shall remain in the possession of the Company until such Shares are
vested as provided in Section 6(e) below.
(d) RESTRICTIONS. Restricted Shares may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
herein. In the event of termination of employment by the Company and its
Subsidiaries for any reason (including death, retirement, Disability, and for
Cause), the Company shall have the right, at the discretion of the Committee, to
repurchase Restricted Shares with respect to which conditions have not lapsed at
their purchase price, or to require forfeiture of such Shares to the Company if
acquired at no cost, from the participant or the participant's legal
representative. The Company must exercise such right of repurchase or forfeiture
not later than the 90th day following such termination of employment (unless
otherwise specified in the written instrument evidencing the Restricted Share
Award).
<PAGE>
(e) VESTING OF RESTRICTED SHARES. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Shares and the Company's right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the Shares
on which all restrictions have lapsed shall no longer be Restricted Shares and
shall be deemed "vested."
(f) WAIVER, DEFERRAL AND REINVESTMENT OF DIVIDENDS. The written instrument
evidencing the Restricted Share Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Shares.
SECTION 7. UNRESTRICTED SHARE AWARDS
-------------------------
(a) GRANT OR SALE OF UNRESTRICTED SHARES. The Committee may, in its sole
discretion, grant (or sell at a purchase price determined by the Committee) an
Unrestricted Share Award to any employee of the Company or any Subsidiary which
will entitle such employee to receive Shares free of any restrictions under the
Plan ("Unrestricted Shares"). Unrestricted Shares may be granted or sold as
described in the preceding sentence in respect of past services or other valid
consideration, or in lieu of any cash compensation to such employee.
(b) ELECTIONS TO RECEIVE UNRESTRICTED SHARES IN LIEU OF COMPENSATION. Upon
the request of an employee and with the consent of the Committee, each employee
may, pursuant to an irrevocable written election delivered to the Company no
later than the date or dates specified by the Committee, receive a portion of
the cash compensation otherwise due to him in Unrestricted Shares (valued at
Fair Market Value on the date or dates the cash compensation would otherwise be
paid, or on the effective date of the election, if later). With respect to any
employee who is subject to Section 16 of the Act, such irrevocable election
shall become effective no earlier than six months and one day following the date
of such election and the revocation of such election shall be effective six
months and one day following the date of the revocation.
(c) ELECTIONS TO RECEIVE UNRESTRICTED SHARES IN LIEU OF TRUSTEES' FEES.
Each Independent Trustee may, pursuant to an irrevocable written election
delivered to the Company, receive all or a portion of his cash trustee's fees in
Unrestricted Shares (valued at Fair Market Value on the date or dates the
trustee's fees would otherwise be paid, or on the effective date of the
election, if later). Such election shall be effective no earlier than six months
and one day following the date of such election. Any revocation of such election
shall be effective six months and one day following the date of the revocation.
SECTION 8. TAX WITHHOLDING
---------------
(a) PAYMENT BY PARTICIPANT. Each participant shall, no later than the date
as of which the value of an Award or of any Shares or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(b) PAYMENT IN SHARES. A participant may elect to have such tax withholding
obligation satisfied, in whole or in part, by (i) authorizing the Company to
withhold from of Shares to be issued pursuant to any Award a number of shares
<PAGE>
with an aggregate Fair Market Value (as of the date the withholding is effected)
that would satisfy the withholding amount due, or (ii) transferring to the
Company Shares owned by the participant with an aggregate Fair Market Value (as
of the date the withholding is effected) that would satisfy the withholding
amount due. With respect to any participant who is subject to Section 16 of the
Act, the following additional restrictions shall apply:
(A) the election to satisfy tax withholding obligations relating to an
Award in the manner permitted by this Section 8(b) shall be made either (1)
during the period beginning on the third business day following the date of
release of quarterly or annual summary statements of revenues of the
Company and ending on the twelfth business day following such date, or (2)
at least six months prior to the date as of which the receipt of such an
Award first becomes a taxable event for Federal income tax purposes;
(B) such election shall be irrevocable;
(C) such election shall be subject to the consent or disapproval of
the Committee; and
(D) the Shares withheld to satisfy tax withholding must pertain to an
Award which has been outstanding for at least six months.
Notwithstanding the foregoing, the first sentence of Section 8(b)(A) shall not
be applicable until the Company has been subject to the reporting requirements
of Section 13(a) of the Act for at least a year prior to the election and has
filed all reports and statements required to be filed pursuant to that Section
for that year.
SECTION 9. TRANSFER, LEAVE OF ABSENCE, ETC.
--------------------------------
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
SECTION 10. AMENDMENTS AND TERMINATION
--------------------------
The Board may, at any time, amend or discontinue the Plan and the Committee
may, at any time, amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price, but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Award if it were then initially granted
under this Plan) for the purpose of satisfying changes in law or for any other
lawful purpose, but no such action shall adversely affect rights under any
outstanding Award without the holder's consent. To the extent required by the
Code to ensure that Options granted hereunder qualify as Incentive Share Options
and to the extent required by the Act to ensure that Awards and Options granted
under the Plan are exempt under Rule 16b-3 promulgated under the Act, Plan
amendments shall be subject to approval by the Company's shareholders.
<PAGE>
SECTION 11. STATUS OF PLAN
--------------
With respect to the portion of any Award which has not been exercised and
any payments in cash, Shares or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Shares or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provision of the foregoing sentence.
SECTION 12. CHANGE OF CONTROL PROVISIONS
----------------------------
Upon the occurrence of a Change of Control as defined in this Section 12:
(a) Each outstanding Share Option shall automatically become fully
exercisable notwithstanding any provision to the contrary herein.
(b) Restrictions and conditions on Restricted Share Awards shall
automatically be deemed waived, and the recipients of such Awards shall become
entitled to receipt of the Shares subject to such Awards unless the Committee
shall otherwise expressly provide at the time of grant.
<PAGE>
(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company, any of its Subsidiaries, any
trustee, fiduciary or other person or entity holding securities under
any employee benefit plan of the Company or any of its Subsidiaries),
together with all "affiliates" and "associates" (as such terms are
defined in Rule 12b-2 under the Act) of such person, shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company
representing 40% or more of either (A) the combined voting power of
the Company's then outstanding securities having the right to vote in
an election of the Company's Board of Trustees ("Voting Securities")
or (B) the then outstanding Shares of the Company (in either such case
other than as a result of acquisition of securities directly from the
Company); or
(ii) persons who, as of the date of the closing of the Company's
initial public offering, constitute the Company's Board of Trustees
(the "Incumbent Trustees") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent
to the closing of the Company's initial public offering whose election
or nomination for election was approved by a vote of at least a
majority of the Incumbent Trustees shall, for purposes of this Plan,
be considered an Incumbent Trustee; or
(iii) the shareholders of the Company shall approve (A)any
consolidation or merger of the Company or any Subsidiary where the
shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the
Act), directly or indirectly, shares representing in the aggregate 50%
of the voting shares of the corporation issuing cash or securities in
the consolidation or merger (or of its ultimate parent corporation, if
any), (B) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by
any party as a single plan) of all or substantially all of the assets
of the Company or (C) any plan or proposal for the liquidation or
dissolution of the Company;
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
Shares or other Voting Securities outstanding, increases (x) the proportionate
number of Shares beneficially owned by any person to 40% or more of the Shares
then outstanding or (y) the proportionate voting power represented by the Voting
Securities beneficially owned by any person to 40% or more of the combined
voting power of all then outstanding Voting Securities; provided, however, that
if any person referred to in clause (x) or (y) of this sentence shall thereafter
become the beneficial owner of any additional Shares or other Voting Securities
(other than pursuant to a share split, stock dividend, or similar transaction),
then a "Change of Control" shall be deemed to have occurred for purposes of the
foregoing clause(i).
SECTION 13. GENERAL PROVISIONS
------------------
(a) NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee may
require each person acquiring Shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the Shares
without a view to distribution thereof.
<PAGE>
No Shares shall be issued pursuant to an Award until all applicable
securities law and other legal and stock exchange requirements have been
satisfied. The Committee may require the placing of such stop-orders and
restrictive legends on certificates for Shares and Awards as it deems
appropriate.
(b) DELIVERY OF SHARE CERTIFICATES. Delivery of share certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a share transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) OTHER COMPENSATION ARRANGEMENTS; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to shareholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.
SECTION 14. EFFECTIVE DATE OF PLAN
----------------------
The Plan shall become effective upon approval by the holders of a majority
of the Shares of the Company present or represented and entitled to vote at a
meeting of shareholders. Subject to such approval by the shareholders, and to
the requirement that no Shares may be issued hereunder prior to such approval,
Share Options and other Awards may be granted hereunder on and after adoption of
the Plan by the Board.
SECTION 15. GOVERNING LAW
-------------
This Plan shall be governed by Maryland law except to the extent such law
is preempted by federal law.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF GABLES RESIDENTIAL TRUST FOR THE SIX MONTHS ENDED JUNE
30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000913782
<NAME> GABLES RESIDENTIAL TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 11,937
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,580,257
<DEPRECIATION> 115,888
<TOTAL-ASSETS> 1,499,065
<CURRENT-LIABILITIES> 0
<BONDS> 771,400
4,500
115,000
<COMMON> 255
<OTHER-SE> 437,212
<TOTAL-LIABILITY-AND-EQUITY> 1,499,065
<SALES> 0
<TOTAL-REVENUES> 97,666
<CGS> 0
<TOTAL-COSTS> 56,533
<OTHER-EXPENSES> 2,010
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,567
<INCOME-PRETAX> 17,653
<INCOME-TAX> 0
<INCOME-CONTINUING> 17,653
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,653
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
</TABLE>
