UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
------ EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
------ EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-28378
AMREIT, INC.
MARYLAND CORPORATION IRS IDENTIFICATION NO.
76-0410050
8 GREENWAY PLAZA, SUITE 824 HOUSTON, TX 77046
(713) 850-1400
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
X Yes No
- ------- -------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMREIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited)
ASSETS
Cash and cash equivalents $ 239,216
Accounts receivable 13,000
Note receivable 732,226
Investment in joint venture 368,584
Property:
Escrow deposits 1,000
Land 11,161,542
Buildings 16,963,945
Furniture, fixtures and equipment 66,433
------
28,192,920
Accumulated depreciation (582,987)
--------
Total property 27,609,933
----------
Net investment in direct financing leases 3,168,974
Other assets:
Preacquisition costs 344,543
Accrued rental income 224,425
Other 51,645
------
Total other assets 620,613
-------
TOTAL ASSETS $32,752,546
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Note payable $ 9,868,884
Accounts payable 87,469
Security deposit 15,050
------
TOTAL LIABILITIES 9,971,403
---------
Minority interest 5,227,494
Shareholders' equity:
Preferred stock, $.01 par value, 10,001,000 shares
authorized,none issued
Common stock, $.01 par value, 100,010,000 shares
authorized, 2,384,117 shares issued and outstanding 23,841
Capital in excess of par value 21,655,867
Accumulated distributions in excess of earnings (4,122,984)
Cost of treasury stock (3,075)
------
TOTAL SHAREHOLDERS' EQUITY 17,553,649
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $32,752,546
===========
See Notes to Consolidated Financial Statements.
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<PAGE>
AMREIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Quarter Year to Date
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Rental income from operating leases $ 715,227 $ 335,572 $ 1,678,433 $ 859,158
Earned income from direct financing leases 85,200 84,927 255,454 254,653
Interest income 49,240 46,126 89,962 119,473
Other income 78,554 - 91,485 -
------ ------- ------ -------
Total revenues 928,221 466,625 2,115,334 1,233,284
------- ------- --------- ---------
Expenses:
General operating and administrative 195,653 20,696 356,998 85,644
Reimbursements and fees to related party - 25,107 57,800 52,107
Interest 164,676 - 202,507 6,000
Depreciation 110,970 41,488 241,715 101,408
Amortization 15,689 15,689 47,066 47,066
Merger costs (Note 7) 37,740 - 2,427,658 -
Potential acquisition costs 112,711 - 295,452 -
------- ------- ------- -------
Total expenses 637,439 102,980 3,629,196 292,225
------- ------- --------- -------
Income (loss) before minority interest in net
income of consolidated joint ventures 290,782 363,645 (1,513,862) 941,059
Minority interest in net income of consolidated joint venture (131,571) (127,901) (394,639) (322,367)
-------- -------- -------- --------
Net income (loss) $ 159,211 $ 235,744 $(1,908,501) $ 618,692
========= ========= =========== =========
Basic earnings (loss) per share $ 0.07 $ 0.14 $ (0.88) $ 0.42
========= ========= =========== =========
Diluted earnings (loss) per share $ 0.07 $ 0.14 $ (0.88) $ 0.40
========= ========= =========== =========
Weighted average number of common shares outstanding 2,377,505 1,649,002 2,177,086 1,478,942
========= ========= ========= =========
Weighted average number of common shares outstanding
plus dilutive potential common shares 2,377,505 1,710,481 2,177,086 1,540,421
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
AMREIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Quarter Year to Date
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 159,211 $ 235,744 $(1,908,501) $ 618,692
Adjustments to reconcile net income (loss) to net cash
flows from operating activities:
Amortization 15,689 15,689 47,066 47,066
Depreciation 110,970 41,488 241,715 101,408
Merger costs - - 2,283,322 -
Decrease (increase) in accounts receivable 157,055 (20,262) 111,600 (15,143)
Increase (decrease) in accounts payable (69,601) 5,321 (6,849) 3,530
Cash receipts from direct financing leases
less than income recognized (2,644) (2,369) (7,782) (6,981)
Decrease in escrow deposits, net of
minority interest partners 34,000 - 10,100 38,250
Increase in accrued rental income (25,121) (27,303) (56,246) (66,249)
Increase in other assets (8,614) (41,952) (8,614) (89,035)
Increase in minority interest 131,571 127,901 394,639 322,367
------- ------- ------- -------
Net cash provided by operating activities 502,516 334,257 1,100,450 953,905
------- ------- --------- -------
Cash flows from investing activities:
Acquisition of real estate (1,288,232) (4,247,114) (5,967,449) (5,766,118)
Additions of furniture, fixtures and equipment (2,473) - (2,473) -
Investment in note receivable (732,226) - (732,226) -
Investment in joint venture (368,584) - (368,584) -
Change in preacquisition costs 86,429 (71,095) 28,143 (226,795)
------ ------- ------ --------
Net cash used in investing activities (2,305,086) (4,318,209) (7,042,589) (5,992,913)
---------- ---------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of stock, net 1,000 1,353,375 2,480,782 4,496,846
Common stock repurchases (3,075) - (3,075) -
Proceeds from notes payable 1,237,298 3,375,400 3,890,552 3,375,400
Distributions paid to shareholders (431,108) (288,928) (1,160,707) (774,966)
Distributions to minority interest partners (140,089) (131,525) (427,937) (329,950)
-------- -------- -------- --------
Net cash provided by financing activities 664,026 4,308,322 4,779,615 6,767,330
------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents (1,138,544) 324,370 (1,162,524) 1,728,322
Cash and cash equivalents at beginning of period 1,377,760 3,020,263 1,401,740 1,616,311
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 239,216 $3,344,633 $ 239,216 $3,344,633
========== ========== =========== ==========
Supplemental disclosure of non-cash investing activities:
Accrued acquisition costs included in construction in progress $ - $ 520,361 $ - $ 520,361
========= ========== ========== ==========
Supplemental disclosure of non-cash financing activities:
Real estate contributed by partners of the consolidated
joint ventures $ - $ - $ - $1,391,780
========= ========= ========== ==========
Issuance of stock in lieu of note payment $ 100,564 $ - $ 270,564 $ -
========== ========= =========== =========
Issuance of stock in connection with Merger $ - $ - $ 2,244,380 $ -
========= ========= =========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE>
AMREIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AmREIT, Inc. ("the Company"), formerly American Asset Advisers Trust, Inc.,
was incorporated on August 17, 1993 as a Maryland corporation. The initial
issuance of 20,001 shares of stock for $200,010 was to American Asset
Advisers Realty Corporation ("AAA"). Commencing March 17, 1994, the Company
offered up to 2,000,000 additional shares of common stock together with
1,000,000 warrants. The warrants were exercisable at $9 per share until
March 15, 1998. The offering period of the initial public offering
terminated on March 15, 1996 with 1,008,252 shares being issued. In
addition, 57,316 shares were issued from the exercise of the Warrants. On
June 18, 1996, the Company commenced a follow-on offering of up to
2,853,659 additional shares of its common stock. The offering was
terminated on May 22, 1998 with 1,056,946 shares being issued.
The Company was formed with the intention to qualify and to operate as a
real estate investment trust under federal tax laws. The Company will
acquire commercial and industrial properties using invested and borrowed
funds.
The consolidated financial statements include the accounts of AmREIT, Inc.,
its wholly-owned subsidiaries, AmREIT Realty Investment Corporation
("ARIC"), and its six joint ventures with related parties. In June 1998,
ARIC was organized to acquire, develop, hold and sell real estate in the
short-term for capital gains and/or receive fee income. The Company owns
100% of the outstanding preferred shares of ARIC. The preferred shares are
entitled to receive dividends equal to 95% of net income and are expected
to be paid from cash flows, if any. All significant intercompany accounts
and transactions have been eliminated in consolidation. The Company owns
greater than 50% of the aforementioned joint ventures and exercises control
over operations.
The financial records of the Company are maintained on the accrual basis of
accounting whereby revenues are recognized when earned and expenses are
reflected when incurred.
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents. There has been no cash paid for income taxes
during 1998 or 1997. For the three and nine months ended September 30,
1998, the Company paid interest of $202,480 and $518,998, respectively, of
which $37,804 and $316,491 were capitalized on properties under
construction. There was no other cash paid for interest during the first
nine months of 1998 or 1997.
Real estate is leased to others on a net lease basis whereby all operating
expenses related to the properties including property taxes, insurance and
common area maintenance are the responsibility of the tenant. The leases
are accounted for under the operating method or the direct financing
method.
Under the operating lease method, the properties are recorded at cost.
Rental income is recognized ratably over the life of the lease and
depreciation is charged based upon the estimated useful life of the
property.
-5-
<PAGE>
Under the direct financing lease method, properties are recorded at their
net investment. Unearned income is deferred and amortized to income over
the life of the lease so as to produce a constant periodic rate of return.
Expenditures related to the development of real estate are carried at cost
plus capitalized carrying charges, acquisition costs and development costs.
Carrying charges, primarily interest and loan acquisition costs, and direct
and indirect development costs related to buildings under construction are
capitalized as part of construction in progress. The Company capitalizes
acquisition costs once the acquisition of the property becomes probable.
Management reviews its properties for impairment whenever events or changes
in circumstances indicate that the carrying amount of the assets, including
accrued rental income, may not be recoverable through operations.
Management determines whether an impairment in value occurred by comparing
the estimated future cash flows (undiscounted and without interest
charges), including the residual value of the property, with the carrying
cost of the individual property. If an impairment is indicated, a loss will
be recorded for the amount by which the carrying value of the asset exceeds
its fair value.
Buildings are depreciated using the straight-line method over an estimated
useful life of 39 years.
Organization costs incurred in the formation of the Company are amortized
on a straight-line basis over five years.
Issuance costs incurred in the raising of capital through the sale of
common stock are treated as a reduction of shareholders' equity.
The Company is qualified as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, and is, therefore, not subject to
Federal income taxes provided it meets all conditions specified by the
Internal Revenue Code for retaining its REIT status, including the
requirement that at least 95% of its real estate investment trust taxable
income is distributed by March 15 of the following year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The Company believes the carrying value of financial instruments consisting
of cash, cash equivalents, accounts receivable and accounts and notes
payable approximate their fair value.
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of
the disclosures required by generally accepted accounting principles. The
financial statements reflect all normal and recurring adjustments which
are, in the opinion of management, necessary to present a fair statement of
results for the three and nine month periods ended September 30, 1998 and
September 30, 1997.
The financial statements of AmREIT, Inc. contained herein should be read in
conjunction with the financial statements included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1997.
-6-
<PAGE>
2. NOTE RECEIVABLE
On July 21, 1998, the Company entered into a note agreement with KK
Shadowlake, Ltd. in the amount of $1,198,740 for the construction of a
property which will be acquired by the Company. The Company then intends to
sell the property to a third party. As of September 30, 1998, the Company
had advanced $732,226 on the note. The note bears interest at the prime
lending rate plus one percent and is payable monthly. The note is secured
by the land and construction in progress and is due on July 21, 1999.
3. INVESTMENT IN JOINT VENTURE
On June 29, 1998, the Company entered into a joint venture agreement with
GDC, Ltd. The joint venture was formed to develop a multi-tenant retail
center and to sell to a third party upon completion. The Company's interest
in the joint venture is approximately 6.67% and is accounted for using the
cost method. In addition, the Company shall receive a preferred return on
its investment. The Company is not required to contribute any additional
money to the joint venture.
4. NOTE PAYABLE
In December 1997, the Company entered into an amended and restated
unsecured revolving credit facility (the "Amended Credit Facility") with a
borrowing capacity up to $15 million through February 1999. The actual
amount available to the Company is dependent on certain covenants such as
the value of unencumbered assets. The Amended Credit Facility bears
interest at 2.00% over varying London Interbank Offered Rates and it is
being used to acquire additional properties. As of September 30, 1998,
$9,868,884 was outstanding under the Amended Credit Facility.
5. MAJOR TENANTS
The following schedule summarizes rental income by lessee for the three and
nine months ended September 30, 1998 and September 30, 1997:
Quarter Year to Date
1998 1997 1998 1997
---- ---- ---- ----
Tandy Corporation $27,225 $27,225 $81,675 $81,675
America's Favorite Chicken Co. 24,566 24,481 73,698 73,445
Blockbuster Music Retail, Inc. 94,475 94,475 283,427 283,427
One Care Health Industries, Inc. 51,572 50,409 152,390 151,227
Just For Feet, Inc. 365,225 184,451 738,624 405,681
Bank United 39,458 39,458 118,356 118,356
Hollywood Entertainment Corp. 68,282 - 208,709 -
OfficeMax, Inc. 129,624 - 277,008 -
------- ------- ------- -------
800,427 420,499 1,933,887 1,113,811
======= ======= ========= =========
6. EARNINGS PER SHARE
Basic earnings per share has been computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
share has been computed by dividing net income (as adjusted) by the
weighted average number of common shares outstanding plus dilutive
potential common shares.
-7-
<PAGE>
7. MERGER TRANSACTION
On June 5, 1998, the Company's shareholders voted to approve an agreement
and plan of merger with AAA, whereby the stockholder of AAA agreed to
exchange 100% of the outstanding shares of common stock of AAA for up to
900,000 shares (the "Share Consideration") of the Company's common stock
(the "Merger"). The common stock of AAA was wholly owned by the president
and director of the Company. As a result of the Merger, the Company became
a fully integrated, self-administered real estate investment trust ("REIT")
effective June 5, 1998. Effective June 5, 1998, 213,260 shares were paid
and the balance (the "Share Balance") of the Share Consideration is to be
paid over time to the extent certain goals are achieved after the Merger.
The market value of the common shares issued effective June 5, 1998 was
$2,185,915 of which $58,465 was allocated to the net tangible assets
acquired and the difference of $2,127,450 was accounted for as expenses
incurred in acquiring AAA from a related party. In addition, in connection
with the Merger, the Company incurred costs during the three and nine
months ended September 30, 1998 of $37,740 and $300,208, respectively,
consisting primarily of legal and accounting fees, valuation opinions and
fairness opinions. For accounting purposes, AAA was not considered a
"business" for purposes of applying APB Opinion No. 16, "Business
Combinations," and therefore, the market value of the common shares issued
in excess of the fair value of the net tangible assets acquired was charged
to expense rather than capitalized as goodwill. To the extent the Share
Balance is paid over time, the market value of the common shares issued
will also be charged to expense. Upon consummation of the Merger on June 5,
1998, certain employees of AAA became employees of the Company, and any
obligation to pay fees under the advisor agreement between the Company and
AAA was terminated.
8. RELATED PARTY TRANSACTIONS
See Note 7 regarding the Merger.
Related Party Transactions Subsequent to the Merger:
Beginning June 5, 1998, the Company provides property acquisition, leasing,
administrative and management services for eleven affiliated real estate
limited partnerships (the "Partnerships"). The president and director of
the Company owns between 80% and 100% of the stock of the companies that
serve as the general partner of the Partnerships. Reimbursements and fees
of $52,554 and $65,485 were paid by the Partnerships to the Company for the
three and nine months ended September 30, 1998.
Related Party Transactions Prior to the Merger:
The Company had entered into an Omnibus Services Agreement with AAA whereby
AAA provided property acquisition, leasing, administrative and management
services for the Company. Reimbursements and fees of $57,800 were incurred
and charged to expense for the period ended June 5, 1998. Reimbursements
and fees of $25,107 and $52,107 were incurred and charged to expense for
the three and nine months ended September 30, 1997, respectively.
AAA had incurred certain costs in connection with the organization and
syndication of the Company. Reimbursement of these costs become obligations
of the Company in accordance with the terms of the offering. Costs of
$56,164 were incurred by AAA for the period ended June 5, 1998 in
connection with the issuance and marketing of the Company's stock. Costs of
$38,156 and $124,996 were incurred by AAA for the three and nine months
ended September 30, 1997, respectively, in connection with the issuance and
marketing of the Company's stock. These costs are reflected as issuance
costs and are recorded as a reduction to capital in excess of par value.
-8-
<PAGE>
Acquisition fees, including real estate commissions, finders fees,
consulting fees and any other non-recurring fees incurred in connection
with locating, evaluating and selecting properties and structuring and
negotiating the acquisition of properties are included in the basis of the
properties. Acquisition fees of $123,389 were incurred and paid to AAA for
the period ended June 5, 1998. Acquisition fees of $589,879 and $826,654
were incurred and paid to AAA for the three and nine months ended September
30, 1997, respectively. Acquisition fees paid to AAA included $344,543 that
was earned prior to purchasing certain properties.
On October 16, 1997, the Company entered into a joint venture with AAA Net
Realty XI, Ltd., an entity with common management. The joint venture was
formed to purchase a property, which is being operated as a Hollywood Video
store in Lafayette, Louisiana. The property was purchased on October 31,
1997 after the construction was completed. The Company's interest in the
joint venture is 74.58%.
On February 11, 1997, the Company entered into a joint venture with AAA Net
Realty XI, Ltd. The joint venture was formed to purchase a property, which
is being operated as a Just For Feet retail store in Baton Rouge,
Louisiana. The property was purchased on June 9, 1997 after the
construction was completed. The Company's interest in the joint venture is
51%.
On September 23, 1996, the Company entered into a joint venture with AAA
Net Realty XI, Ltd. The joint venture was formed to purchase a parcel of
land in The Woodlands, Texas upon which the tenant, Bank United,
constructed a branch bank building at its cost. At the termination of the
lease the improvements will be owned by the joint venture. The Company's
interest in the joint venture is 51%.
On April 5, 1996, the Company entered into a joint venture with AAA Net
Realty Fund XI, Ltd. and AAA Net Realty Fund X, Ltd., entities with common
management, to purchase a property which is being operated as a Just For
Feet retail store in Tucson, Arizona. The property was purchased on
September 11, 1996 after the construction was completed. The Company's
interest in the joint venture is 51.9%.
On September 12, 1995, the Company entered into a joint venture agreement
with AAA Net Realty Fund XI, Ltd. to purchase a property, which is being
operated as a Blockbuster Music Store in Wichita, Kansas. The Company's
interest in the joint venture is 51%.
On October 27, 1994, the Company entered into a joint venture agreement
with AAA Net Realty Fund X, Ltd., an entity with common management. The
joint venture was formed to purchase a property, which is being operated as
a Blockbuster Music Store in Independence, Missouri. The Company's interest
in the joint venture is 54.84%.
9. SUBSEQUENT EVENT
In November 1998, the Company entered into an unsecured credit facility
(the "Credit Facility"), which will be used to provide funds for the
acquisition of properties and working capital, and repay all amounts
outstanding under the Company's prior credit facility. Under the Credit
Facility, which has a one year term, the Company may borrow up to $30
million subject to certain covenants such as the value of unencumbered
assets. The Credit Facility contains covenants which, among other
restrictions, require the Company to maintain a minimum net worth, a
maximum leverage ratio, and specified interest coverage and fixed charge
coverage ratios. The Credit Facility bears interest at an annual rate of
LIBOR plus a spread ranging from 1.625% to 2.150%, set quarterly depending
on the Company's leverage ratio.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Company is a fully integrated, self-administered real estate investment
trust. The Company was organized on August 17, 1993 to acquire, either directly
or through joint venture arrangements, undeveloped, newly constructed and
existing net-lease real estate that is located primarily on corner or out-parcel
locations in strong commercial corridors, to lease on a net-lease basis to major
retail businesses and to hold the properties with the expectation of equity
appreciation producing a steadily rising income stream for its shareholders.
The Company is conducting a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue. The Year
2000 Issue is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the Year 2000. The Company believes that the cost of remediation associated
with its computer systems will be minimal and the remediation is anticipated to
be completed in the third quarter of 1999. The other essential component of the
Year 2000 issue is to ensure that the Company's significant tenants are assessed
for Year 2000 compliance. The Company has initiated discussions with its
significant tenants in order to assess their readiness for the Year 2000 issue.
Due to the nature of the tenants' businesses, the Company does not believe the
Year 2000 issue will materially impact the tenants' ability to pay rent.
However, the failure of one or more tenants as a result of the Year 2000 issue
could have a material adverse effect on the Company's results of operation or
financial position. Upon completion of its assessment program, the Company will
consider the necessity of implementing a contingency plan to mitigate any
adverse effects associated with the Year 2000 issue. Though the Company does not
expect the Year 2000 issue to have a material adverse effect on its results of
operation or financial position there can be no assurances of that position.
In June 1998, the Company changed transfer agents from Service Data Corporation
to The Bank of New York.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations has been the principal source of capital to fund the
Company's ongoing operations. The Company's issuance of common stock and the use
of the Company's credit facility have been the principal sources of capital
required to fund its growth.
In order to continue to expand and develop its portfolio of properties and other
investments, the Company intends to finance future acquisitions and growth
through the most advantageous sources of capital available to the Company at the
time. Such capital sources may include proceeds from public or private offerings
of the Company's debt or equity securities, secured or unsecured borrowings from
banks or other lenders, or the disposition of assets, as well as undistributed
funds from operations.
The Company's leases typically provide that the tenant bears responsibility for
substantially all property costs and expenses associated with ongoing
maintenance and operation, including utilities, property taxes and insurance. In
addition, the Company's leases generally provide that the tenant is responsible
for roof and structural repairs. Certain of the Company's properties are subject
to leases under which the Company retains responsibility for certain costs and
expenses associated with the property. Because many of the properties which are
subject to leases that place these responsibilities on the Company are recently
constructed, management anticipates that capital demands to meet obligations
with respect to these properties will be minimal for the foreseeable future and
can be met with funds from operations and working capital. The Company may be
required to use bank borrowing or other sources of capital in the event of
unforeseen significant capital expenditures.
-10-
<PAGE>
The initial issuance of 20,001 shares of stock for $200,010 was to AAA. On March
17, 1994, the Company commenced an offering of 2,000,000 Shares of Common Stock,
together with 1,000,000 Warrants (collectively "Securities"). Until the
completion of the offering in March 1996, the Securities were offered on the
basis of two (2) Shares of Common Stock and one (1) Warrant for a total purchase
price of $20.00. The Shares and Warrants are separately transferable by an
investor. Each Warrant entitled the holder to purchase one Share for $9.00 until
March 15, 1998. The offering period for the initial public offering terminated
on March 15, 1996 with gross proceeds totaling $10,082,520 (1,008,252 shares).
In addition, $515,844 (57,316) was received from the exercise of the Warrants.
On June 18, 1996, the Company commenced a follow-on offering of up to
$29,250,000 (2,853,659 shares) of additional shares of its common stock. The
offering terminated on May 22, 1998 with gross proceeds totaling $10,827,300
(1,056,946 shares).
In December 1997, the Company entered into an amended and restated unsecured
revolving credit facility (the "Amended Credit Facility") with a borrowing
capacity up to $15 million through February 1999. The actual amount available to
the Company is dependent on certain covenants such as the value of unencumbered
assets. The Amended Credit Facility bears interest at 2.00% over varying London
Interbank Offered Rates and it is being used to acquire additional properties.
As of September 30, 1998, $9,868,884 was outstanding under the Amended Credit
Facility. These funds were used to acquire properties.
In November 1998, the Company entered into an unsecured credit facility (the
"Credit Facility"), which will be used to provide funds for the acquisition of
properties and working capital, and repay all amounts outstanding under the
Company's prior credit facility. Under the Credit Facility, which has a one year
term, the Company may borrow up to $30 million subject to certain covenants such
as the value of unencumbered assets. The Credit Facility contains covenants
which, among other restrictions, require the Company to maintain a minimum net
worth, a maximum leverage ratio, and specified interest coverage and fixed
charge coverage ratios. The Credit Facility bears interest at an annual rate of
LIBOR plus a spread ranging from 1.625% to 2.150%, set quarterly depending on
the Company's leverage ratio.
As of September 30, 1998, the Company had acquired ten properties directly and
six properties through joint ventures with entities with common management and
had invested $25,939,987, exclusive of any minority interests, including certain
acquisition expenses related to the Company's investment in these properties.
These expenditures resulted in a corresponding decrease in the Company's
liquidity.
On June 5, 1998, the Company's shareholders voted to approve an agreement and
plan of merger with AAA, whereby the stockholder of AAA agreed to exchange 100%
of the outstanding shares of common stock of AAA for up to 900,000 shares (the
"Share Consideration") of the Company's common stock (the "Merger"). The common
stock of AAA was wholly owned by the president and director of the Company. As a
result of the Merger, the Company became a fully integrated, self-administered
real estate investment trust ("REIT") effective June 5, 1998. Effective June 5,
1998, 213,260 shares were paid and the balance (the "Share Balance") of the
Share Consideration is to be paid over time to the extent certain goals are
achieved after the Merger. The market value of the common shares issued
effective June 5, 1998 was $2,185,915 of which $58,465 was allocated to the net
tangible assets acquired and the difference of $2,127,450 was accounted for as
expenses incurred in acquiring AAA from a related party. In addition, in
connection with the Merger, the Company incurred costs during the three and nine
months ended September 30, 1998 of $37,740 and $300,208, respectively,
consisting primarily of legal and accounting fees, valuation opinions and
fairness opinions. For accounting purposes, AAA was not considered a "business"
for purposes of applying APB Opinion No. 16, "Business Combinations," and
therefore, the market value of the common shares issued in excess of the fair
value of the net tangible assets acquired was charged to expense rather than
capitalized as goodwill. To the extent the Share Balance is paid over time, the
market value of the common shares issued will also be charged to expense. Upon
consummation of the Merger on June 5, 1998, certain employees of AAA became
employees of the Company, and any obligation to pay fees under the advisor
agreement between the Company and AAA was terminated.
-11
<PAGE>
Until the Company acquires properties, proceeds are held in short-term, highly
liquid investments that the Company believes to have appropriate safety of
principal. This investment strategy has allowed, and continues to allow, high
liquidity to facilitate the Company's use of these funds to acquire properties
at such time as properties suitable for acquisition are located. At September
30, 1998, the Company's cash and cash equivalents totaled $239,216.
Inflation has had very little effect on income from operations. Management
expects that increases in store sales volumes due to inflation as well as
increases in the Consumer Price Index (C.P.I.), may contribute to capital
appreciation of the Company properties. These factors, however, also may have an
adverse impact on the operating margins of the tenants of the properties.
FUNDS FROM OPERATIONS
Funds from operations (FFO) increased $143,400 or 52% to $420,632 for the three
months ended September 30, 1998 from $277,232 for the three months ended
September 30, 1997. FFO increased $336,224 or 47% to $1,056,324 for the nine
months ended September 30, 1998 from $720,100 for the nine months ended
September 30, 1997. The Company has adopted the National Association of Real
Estate Investment Trusts (NAREIT) definition of FFO. FFO is calculated as net
income (computed in accordance with generally accepted accounting principles)
excluding gains or losses from sales of property, depreciation and amortization
of real estate assets, and nonrecurring items of income or expense. For purposes
of the table below, FFO excludes nonrecurring merger costs and potential
acquisition costs. Management considers FFO an appropriate measure of
performance of an equity REIT because it is predicated on cash flow analysis and
does not necessarily represent cash provided by operating activities in
accordance with generally accepted accounting principles and is not necessarily
indicative of cash available to meet cash needs. The Company's computation of
FFO may differ from the methodology for calculating FFO utilized by other equity
REIT's and, therefore, may not be comparable to such other REIT's. FFO is not
defined by generally accepted accounting principles and should not be considered
an alternative to net income as an indication of the Company's performance.
Below is the reconciliation of net income to funds from operations for the three
and nine months ended September 30:
Quarter Year to Date
1998 1997 1998 1997
---- ---- ---- ----
Net income (loss) $ 159,211 $ 235,744 $(1,908,501) $ 618,692
Plus depreciation 110,970 41,488 241,715 101,408
Plus merger costs 37,740 - 2,427,658 -
Plus potential acquisition costs 112,711 - 295,452 -
--------- --------- ---------- ---------
Total funds from operations $ 420,632 $ 277,232 $ 1,056,324 $ 720,100
========= ========= =========== =========
Cash distributions paid $ 431,108 $ 288,928 $ 1,160,707 $ 774,966
Distributions in excess of FFO $ 10,476 $ 11,696 $ 104,383 $ 54,866
-12-
<PAGE>
Cash flows from operating activities, investing activities, and financing
activities for the three and nine months ended September 30 are presented below:
Quarter Year to Date
1998 1997 1998 1997
---- ---- ---- ----
Operating activities $ 502,516 $ 334,257 $ 1,100,450 $ 953,905
Investing activities $ (2,305,086) $ (4,318,209) $ (7,042,589) $ (5,992,913)
Financing activities $ 664,026 $ 4,308,322 $ 4,779,615 $ 6,767,330
RESULTS OF OPERATIONS
Comparison of the Three Months Ended September 30, 1998 to September 30, 1997:
During the three months ended September 30, 1998 and September 30, 1997, the
Company owned and leased 16 and 9 properties, respectively. During the three
months ended September 30, 1998 and September 30, 1997, the Company earned
$800,427 and $420,499, respectively, in rental income from operating leases and
earned income from direct financing leases. This 90 percent increase in rental
income and earned income is primarily attributable to rental income earned on
the seven additional properties owned during 1998.
During the three months ended September 30, 1998 and September 30, 1997, the
Company's expenses were $637,439 and $102,980, respectively. The $534,459
increase in expenses is primarily attributable to a $164,676 increase in
interest expense as a result of higher average borrowing levels. The increase is
also attributable to (i) $112,711 of costs incurred during the third quarter of
1998 related to potential acquisition costs related to the proposed acquisition
of properties, (ii) a $69,482 increase in depreciation as a result of the
depreciation of the additional properties owned during 1998, and (iii) $37,740
of merger costs incurred during the third quarter of 1998 related to the
acquisition of the Company's advisor, AAA, on June 5, 1998. In addition, the
increase in expenses is attributable to a $174,957 increase in general operating
and administrative expenses. Pursuant to the Merger, the Company acquired AAA
and became internally managed. Effective June 5, 1998, the reimbursements and
fees paid to AAA were replaced with the actual personnel and other operating
costs associated with being internally managed.
Comparison of the Nine Months Ended September 30, 1998 to September 30, 1997:
During the nine months ended September 30, 1998 and September 30, 1997, the
Company owned and leased 16 and 9 properties, respectively. During the nine
months ended September 30, 1998 and September 30, 1997, the Company earned
$1,933,887 and $1,113,811, respectively, in rental income from operating leases
and earned income from direct financing leases. This 74 percent increase in
rental income and earned income is primarily attributable to rental income
earned on the seven additional properties owned during 1998.
During the nine months ended September 30, 1998 and September 30, 1997, the
Company's expenses were $3,629,196 and $292,225, respectively. The $3,336,971
increase in expenses is primarily attributable to $2,427,658 of merger costs
incurred during the first nine months of 1998 related to the acquisition of the
Company's advisor, AAA, on June 5, 1998. The increase is also attributable to
(i) $295,452 of costs incurred during the first nine months of 1998 related to
potential acquisition costs related to the proposed acquisition of properties,
(ii) a $140,307 increase in depreciation as a result of the depreciation of the
additional properties owned during 1998, and (iii) a $196,507 increase in
interest expense as a result of higher average borrowing levels. In addition,
the increase in expenses is attributable to a $271,354 increase in general
operating and administrative expenses. Pursuant to the Merger, the Company
acquired AAA and became internally managed. Effective June 5, 1998, the
reimbursements and fees paid to AAA were replaced with the actual personnel and
other operating costs associated with being internally managed.
-13-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.1 - Revolving credit agreement dated as of November 6, 1998
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the issuer
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AmREIT, Inc.
(Issuer)
November 13, 1998 /s/ H. Kerr Taylor
Date H. Kerr Taylor, President
November 13, 1998 /s/ L. Larry Mangum
Date L. Larry Mangum (Principal Accounting
Officer)
-15-
<PAGE>
REVOLVING CREDIT AGREEMENT
dated as of November 6, 1998
by and among
AmREIT, Inc.
as Borrower
THE FINANCIAL INSTITUTIONS PARTY HERETO
AND THEIR ASSIGNEES UNDER SECTION 11.8. HEREOF
as Lenders
and
WELLS FARGO BANK, NATIONAL ASSOCIATION
as Agent
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1.
DEFINITIONS............................................................... 1
SECTION 1.1 Definitions.................................................. 1
SECTION 1.2 Accounting Terms and Determinations; Covenant Calculations... 17
SECTION 1.3 Subsidiaries................................................. 17
SECTION 1.4 Interpretation Generally; Times.............................. 17
ARTICLE 2.
CREDIT FACILITY........................................................... 18
SECTION 2.1 Making of Revolving Loans.................................... 18
SECTION 2.2 Requests for Revolving Loans................................. 18
SECTION 2.3 Funding...................................................... 19
SECTION 2.4 Continuation................................................. 19
SECTION 2.5 Conversion................................................... 19
SECTION 2.6 Interest Rate................................................ 20
SECTION 2.7 Special Provisions for LIBOR Loans........................... 20
SECTION 2.8 Capital Adequacy............................................. 22
SECTION 2.9 Repayment of Loans........................................... 23
SECTION 2.10 Voluntary Reductions of the Commitments...................... 24
SECTION 2.11 Extension of Revolving Credit Termination Date............... 25
SECTION 2.12 Notes........................................................ 25
SECTION 2.13 Letters of Credit............................................ 25
ARTICLE 3.
GENERAL LOAN PROVISIONS................................................... 30
SECTION 3.1 Fees......................................................... 30
SECTION 3.2 Computation of Interest and Fees............................. 30
SECTION 3.3 Pro Rata Treatment........................................... 30
SECTION 3.4 Sharing of Payments, Etc..................................... 31
SECTION 3.5 Defaulting Lenders........................................... 32
SECTION 3.6 Purchase of Defaulting Lender's Pro Rata Share............... 32
SECTION 3.7 Limitation of Interest....................................... 33
SECTION 3.8 Statements of Account........................................ 35
SECTION 3.9 Agent's Reliance............................................. 35
ARTICLE 4.
UNENCUMBERED POOL PROPERTIES.............................................. 35
ARTICLE 5.
CONDITIONS................................................................ 38
SECTION 5.1 Conditions Precedent to Effectiveness........................ 38
SECTION 5.2 Conditions Precedent to Loans and Issuance of Letters
of Credit.................................................... 40
-i-
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES............................................ 41
SECTION 6.1 Existence and Power.......................................... 41
SECTION 6.2 Ownership Structure.......................................... 41
SECTION 6.3 Authorization of Agreement, Notes, Loan Documents
and Borrowings............................................... 41
SECTION 6.4 Compliance of Agreement, Notes, Loan Documents and
Borrowing with Laws, etc..................................... 41
SECTION 6.5 Compliance with Law; Governmental Approvals.................. 42
SECTION 6.6 Indebtedness and Guarantees.................................. 42
SECTION 6.7 Property Management Agreements and Other Major Agreements.... 42
SECTION 6.8 Absence of Defaults.......................................... 42
SECTION 6.9 Financial Information........................................ 43
SECTION 6.10 Litigation................................................... 43
SECTION 6.11 ERISA........................................................ 43
SECTION 6.12 Taxes........................................................ 43
SECTION 6.13 Investment Company Act; Public Utility Holding Company Act... 43
SECTION 6.14 Full Disclosure.............................................. 44
SECTION 6.15 Insurance.................................................... 44
SECTION 6.16 Not Plan Assets.............................................. 44
SECTION 6.17 Title and Liens.............................................. 44
SECTION 6.18 Unencumbered Pool Properties................................. 44
SECTION 6.19 Margin Stock................................................. 45
SECTION 6.20 Solvency..................................................... 45
ARTICLE 7.
COVENANTS................................................................. 45
SECTION 7.1 Information.................................................. 45
SECTION 7.2 Payment of Obligations....................................... 47
SECTION 7.3 Maintenance of Property; Insurance........................... 48
SECTION 7.4 Conduct of Business; Maintenance of Existence;
Qualification; Amendment of Declaration of Trust............. 48
SECTION 7.5 Compliance with Laws......................................... 49
SECTION 7.6 Inspection of Property, Books and Records.................... 49
SECTION 7.7 Consolidations, Mergers, Acquisitions and Sales of Assets.... 49
SECTION 7.8 Use of Proceeds and Letters of Credit........................ 49
SECTION 7.9 Major Agreements............................................. 50
-ii-
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
SECTION 7.10 Major Construction........................................... 50
SECTION 7.11 ERISA........................................................ 50
SECTION 7.12 ERISA Exemptions............................................. 50
SECTION 7.13 Negative Pledge.............................................. 50
SECTION 7.14 REIT Status.................................................. 51
SECTION 7.15 Agreements with Affiliates................................... 51
SECTION 7.16 New Subsidiaries............................................. 51
SECTION 7.17 Management................................................... 52
SECTION 7.18 Year 2000.................................................... 52
ARTICLE 8.
FINANCIAL COVENANTS....................................................... 53
SECTION 8.1 Minimum Net Worth............................................ 53
SECTION 8.2 Ratio of Total Liabilities to Gross Asset Value.............. 53
SECTION 8.3 Distributions................................................ 53
SECTION 8.4 Ratio of EBITDA to Interest Expense.......................... 53
SECTION 8.5 Ratio of EBITDA to Debt Service and Capital
Expenditures Reserve......................................... 53
SECTION 8.6 Permitted Investments........................................ 54
SECTION 8.7 Other Secured Indebtedness................................... 54
SECTION 8.9 Maximum Loan Availability.................................... 55
ARTICLE 9.
DEFAULTS.................................................................. 55
SECTION 9.1 Events of Default............................................ 55
SECTION 9.2 Remedies Upon an Event of Default............................ 56
SECTION 9.3 Additional Remedies Upon Certain Default..................... 57
SECTION 9.4 Rescission of Acceleration by Majority Lenders............... 57
SECTION 9.5 Allocation of Proceeds....................................... 57
SECTION 9.6 Collateral Account........................................... 58
ARTICLE 10.
THE AGENT................................................................. 59
SECTION 10.1 Appointment and Authorization................................ 59
SECTION 10.2 Agent and Affiliates......................................... 59
SECTION 10.3 Collateral Matters........................................... 60
SECTION 10.4 Approvals of Lenders......................................... 60
SECTION 10.5 Consultation with Experts.................................... 60
SECTION 10.6 Liability of Agent........................................... 60
SECTION 10.7 Indemnification of Agent..................................... 61
SECTION 10.8 Credit Decision.............................................. 61
SECTION 10.9 Successor Agent.............................................. 62
SECTION 10.10 Approvals and Other Actions by Majority Lenders............. 62
-iii-
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
ARTICLE 11.
MISCELLANEOUS............................................................. 63
SECTION 11.1 Notices...................................................... 63
SECTION 11.2 No Waivers................................................... 64
SECTION 11.3 Expenses..................................................... 64
SECTION 11.4 Stamp, Intangible and Recording Taxes........................ 65
SECTION 11.5 Indemnification.............................................. 66
SECTION 11.6 Setoff....................................................... 66
SECTION 11.7 Amendments................................................... 66
SECTION 11.8 Successors and Assigns....................................... 68
SECTION 11.9 Governing Law................................................ 69
SECTION 11.10 Litigation.................................................. 69
SECTION 11.11 Counterparts; Integration................................... 70
SECTION 11.12 Invalid Provisions.......................................... 70
SECTION 11.13 Limitation of Liability of Trustees, Etc.................... 71
-iv-
<PAGE>
Exhibit A Form of Assignment and Acceptance Agreement
Exhibit B Form of Guaranty
Exhibit C Form of Note
Exhibit D Form of Notice of Borrowing
Exhibit E Form of Notice of Continuation
Exhibit F Form of Notice of Conversion
Exhibit G Form of Extension Request
Exhibit H Form of Opinion of Borrower's Counsel
Exhibit I Form of Unencumbered Pool Certificate
Exhibit J Form of Eligibility Certificate
Exhibit K Form of Reaffirmation of Guaranty
Schedule 2.11 Unencumbered Pool Properties subject to Consolidation
Schedule 4.1 Unencumbered Pool Properties as of Agreement Date
Schedule 6.2 Ownership Structure
Schedule 6.6 Indebtedness and Guarantees
Schedule 6.7 Management Agreements and Other Major Agreements
Schedule 6.15 Insurance
-v-
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "Agreement") dated as of November
6, 1998 by and among AmREIT, Inc. a Maryland corporation ("Borrower"), each of
the financial institutions initially a signatory hereto together with their
assignees pursuant to Section 11.8 ("Lenders"), and WELLS FARGO BANK, NATIONAL
ASSOCIATION, as contractual representative for Lenders to the extent and in the
manner provided in Article 10. below (in such capacity "Agent").
WHEREAS, in order to finance pre-development costs, development costs,
construction related costs, tenant improvement costs, working capital, equity
investments, repayment of indebtedness and scheduled amortization payments on
debt or real estate equity investments in various forms of ownership permitted
hereunder and for other purposes permitted by this Agreement, Borrower desires
to borrow from Lenders, on an unsecured revolving credit basis, loans in an
aggregate principal sum outstanding from time to time not exceeding Thirty
Million Dollars ($30,000,000.00); and
WHEREAS, Lenders are willing to make loans to Borrower on such basis
for such purposes, subject to the terms and conditions hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.1. Definitions .
The following terms, as used herein, have the following meanings:
"Adjusted Asset Value" means, as of a given date, (a) EBITDA of
Borrower and its Consolidated Subsidiaries for the fiscal quarter most recently
ended multiplied by (b) 4 and divided by (c) the Capitalization Rate. For
purposes of determining Adjusted Asset Value, EBITDA shall be adjusted by the
Agent in its reasonable discretion to take into account acquisitions and
dispositions of property by Borrower and its Consolidated Subsidiaries and shall
exclude any EBITDA from property upon which construction is then in progress.
"Adjusted LIBO Rate" means, with respect to any Interest Period, an
interest rate per annum equal to the lesser of (a) the sum of (1) the LIBO Rate
with respect to such Interest Period plus (2) the Applicable Margin or (b) the
Maximum Lawful Rate.
"Affiliate" means any Person which controls, is controlled by or is
under common control with Borrower. As used herein, the term "control" means
possession, directly or indirectly, of the power to vote five percent (5%) or
more of any class of voting securities of a Person or to direct or otherwise
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
1
<PAGE>
"Applicable Law" means all applicable provisions of local, state,
federal and foreign constitutions, statutes, rules, regulations, ordinances,
decrees, permits, concessions and orders of all governmental bodies and all
orders and decrees of all courts, tribunals and arbitrators.
"Applicable Margin" shall mean, as of any date of determination, the
percentage rate set forth below for LIBOR Loans corresponding to the ratio of
Total Liabilities to Gross Asset Value of Borrower (as calculated in accordance
with Section 8.2 herein) set forth below:
------------------------------------------------------ ----------------------
Ratio of Total Liabilities to Gross Assets Value Applicable Margin
------------------------------------------------------ ----------------------
less than 0.50 to 1.0 1.625%
------------------------------------------------------ ----------------------
equal to or greater than 0.50 to 1.0 but less than 1.875%
0.61 to 1.0
------------------------------------------------------ ----------------------
equal to or greater than 0.61 to 1.0 but less than 2.150%
0.66 to 1.00
------------------------------------------------------ ----------------------
Within 45 days following the end of each of Borrower's fiscal quarters,
Borrower shall provide the Agent with a calculation of such ratio of Total
Liabilities to Gross Asset Value, together with such supporting financial
information as the Agent may request. Based on such calculation and information,
the Agent shall determine the Applicable Margin in accordance with the above
table and shall notify Borrower and the Lenders of such determination. Each
change in the Applicable Margin shall be retroactive to, and take effect on, the
first calendar day of the end of the fiscal quarter of Borrower for which such
calculation was made. At all times following Borrower's failure to provide such
calculation and information to the Agent and until such calculation and
information is so provided, the Applicable Margin shall be 2.150%.
"Assignee" has the meaning given that term in Section 11.8(c).
"Assignment and Acceptance Agreement" means an Assignment and
Acceptance Agreement between a Lender and an Assignee substantially in the form
of A.
"Base Rate" means a rate of interest equal to the lesser of (a) the
greater of (1) the rate of interest per annum established from time to time by
Wells Fargo Bank, National Association, San Francisco, California and designated
as its prime rate (which rate of interest may not be the lowest rate charged by
such bank, Agent or any of Lenders on similar loans) and (2) the Federal Funds
Rate plus one-half of one percent (0.5%) or (b) the Maximum Lawful Rate. Each
change in the Base Rate shall become effective without prior notice to Borrower
or Lenders automatically as of the opening of business on the date of such
change in the Base Rate.
"Base Rate Loan" means any Revolving Loan hereunder with respect to
which the interest rate is calculated by reference to the Base Rate.
2
<PAGE>
"Business Day" means (a) any day except a Saturday, Sunday or other day
on which commercial banks in Houston, Texas or San Francisco, California are
authorized or required to close and (b) with reference to LIBOR Loans, any day
(except a Saturday, Sunday or other day on which commercial banks in Houston,
Texas or San Francisco, California are authorized or required to close) on which
dealings in Dollar deposits are carried out in the London interbank market.
"Capital Expenditures Reserve" means, for any period and with respect
to any Property, an amount equal to the greater of (a) the aggregate square
footage of all completed space of such Property times $.05, times a fraction,
the numerator of which is the number of days of such period, and the denominator
of which is 365 and (b) the amount of capital expenditures actually made in
respect of such Property, excluding non-reoccurring capital expenditures for
such period.
"Capital Stock" means any common stock, preferred stock, other capital
stock or other equity interest in a Person that is a corporation.
"Capitalization Rate" means nine and one-half percent (9.50%).
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Collateral Account" means a special interest-bearing deposit account
maintained by Agent under its sole dominion and control.
"Commitment" means, as to each Lender, such Lender's obligation to make
Revolving Loans pursuant to Section 2.1 and to participate in Letters of Credit
pursuant to Section 2.13(f) in an amount up to, but not exceeding, the amount
set forth for such Lender on its signature page hereto as such Lender's
"Commitment Amount" or as set forth in any Assignment and Assumption Agreement
for such Lender, as the same may be reduced from time to time pursuant to
Section 2.10 or as a result of an assignment pursuant to Section 11.8(c).
"Compliance Certificate" means the certificate described in
Section 7.1(c).
"Consequential Loss" means, for any Lender with respect to (a)
Borrower's payment of all or any portion of the then-outstanding principal
amount of a LIBOR Loan on a day other than the last day of the Interest Period
related thereto or (b) any of the circumstances specified in Section 2.7(d) upon
which a Consequential Loss may be incurred, any loss (excluding loss of
anticipated profits), cost or expense incurred by such Lender as a result of the
timing of such payment or Loan or in the redepositing, redeploying or
reinvesting the principal amount so paid or affected by the timing of such Loan
or the circumstances described in such Section, including without limitation,
the sum of (i) the interest which, but for the payment or timing of the Loan,
such Lender would have earned in respect of such principal amount, reduced, if
such Lender is able to redeposit, redeploy, or reinvest such principal amount by
the interest earned by such Lender as a result of so redepositing, redeploying
or reinvesting such principal amount and (ii) any expense or penalty incurred by
such Lender on redepositing, redeploying or reinvesting such principal amount.
All determinations of Consequential Loss shall be made by the Agent exercising
its reasonable judgment.
3
<PAGE>
"Consolidated Subsidiary" means, with respect to a Person at any date,
any Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in its consolidated financial statements in accordance with
GAAP, if such statements were prepared as of such date.
"Contingent Obligation" means, for any Person, any commitment,
undertaking, Guarantee or other obligation constituting a contingent liability
that must be accrued under GAAP.
"Continue," "Continuation" and "Continued" each refers to the
continuation of a LIBOR Loan from one Interest Period to the next Interest
Period pursuant to Section 2.4.
"Convert," "Conversion" and "Converted" each refers to the conversion
of a Loan of one Type into a Loan of another Type pursuant to Section 2.5.
"Debt Service" means, with respect to any Person and for any period,
the sum of (a) Interest Expense of such Person for such period plus (b)
regularly scheduled principal payments on Indebtedness of such Person during
such period other than any regularly scheduled principal payment payable on any
Indebtedness which repays such Indebtedness in full, to the extent the amount of
such final scheduled principal payment is greater than the scheduled principal
payment immediately preceding such final scheduled principal payment.
"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.
"Defaulting Lender" has the meaning given that term in Section 3.5.
"Dollars" or "$" means the lawful currency of the United States of
America.
"EBITDA" means, with respect to any Person and for any period and
without duplication, the sum of (a) net earnings (loss) of such Person for such
period (excluding equity in net earnings or net loss of Unconsolidated
Affiliates) plus (b) depreciation and amortization expense and other non-cash
charges of such Person for such period (but only to the extent deducted in
determining net income (loss) for such period) plus (c) interest expense of such
Person for such period (but only to the extent deducted in determining net
income (loss) for such period) plus (d) income and franchise tax expense of such
Person in respect of such period (but only to the extent deducted in determining
net income (loss) for such period) minus (with respect to gains) or plus (with
respect to losses) (e) extraordinary gains or losses of such Person,
non-recurring items of income or expense relating to mergers and potential
acquisitions acceptable to Majority Lenders in their reasonable discretion, and
gains and losses from sales of assets of such Person for such period plus (f)
such Person's pro rata share of EBITDA of each of such Person's Unconsolidated
Affiliates (determined in a manner consistent with the calculation of such
Person's EBITDA) minus (with respect to gains) or plus (with respect to losses)
any net income attributable to partnerships which hold Properties in which
partnerships Borrower has direct or indirect (through a subsidiary of Borrower)
ownership interest of not greater than fifty percent (50%).
4
<PAGE>
"Economic Occupancy Rate" means, with respect to a Property at any
time, the ratio, expressed as a percentage, of (a) the net rentable square
footage of such Property for which tenants are paying rent (whether or not
actually occupied by such tenants) pursuant to binding leases as to which no
monetary default has occurred and has been continuing for a period of 90 or more
days to (b) the aggregate net rentable square footage of such Property.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 5.1.
"Eligible Property" means a Property which satisfies all of the
following requirements as determined by Agent: (a) such Property is owned 100%
in fee simple by Borrower or a Wholly Owned Subsidiary of Borrower or such
Property shown on Schedule 4.1 becomes owned 100% in fee simple by Borrower or a
Wholly Owned Subsidiary of Borrower within 60 days of the Effective Date; (b)
neither such Property, nor any interest of Borrower or such Wholly Owned
Subsidiary therein, is subject to any Lien other than Permitted Liens or to any
agreement (other than this Agreement or any other Loan Document) that prohibits
the creation of any Lien thereon as security for Indebtedness; (c) if such
Property is owned by a Wholly Owned Subsidiary: (i) none of Borrower's direct or
indirect ownership interest in such Wholly Owned Subsidiary is subject to any
Lien other than Permitted Liens or to any agreement (other than this Agreement
or any other Loan Document) that prohibits the creation of any Lien thereon as
security for Indebtedness and (ii) neither such Wholly Owned Subsidiary, nor any
other Wholly Owned Subsidiary through which Borrower holds any indirect interest
in such Wholly Owned Subsidiary, is subject to any restriction of any kind which
would limit its ability to pay or perform its obligations under the Guaranty
required to be delivered hereunder prior to its obligation to pay dividends or
make any other distribution on any of such Wholly Owned Subsidiary's capital
stock or other securities owned by Borrower or any other Wholly Owned Subsidiary
of Borrower; (d) such Property has an Occupancy Rate of at least 80% and an
Economic Occupancy Rate of at least 95%; and (e) such Property is free of all
structural defects, title defects, environmental conditions or other adverse
matters except for defects, conditions or matters individually or collectively
which are not material to the profitable operation of such Property.
"Eligibility Certificate" means the certificate described in
Section 4.1(b)(iii).
"Environmental Laws" means any and all Applicable Laws relating to the
environment and that are applicable to Borrower and its assets or properties,
the effect of the environment on human health or to emissions, discharges or
releases of pollutants, contaminants, Hazardous Substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Substances or wastes or the clean-up or
other remediation thereof.
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<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
that are treated as a single employer under Section 414 of the Internal Revenue
Code.
"ERISA Plan" means any employee benefit plan subject to Title I of
ERISA.
"Event of Default" means the occurrence of any of the events specified
in Section 9.1, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or nongovernmental body; provided that any requirement for notice
or lapse of time or any other condition has been satisfied.
"Executive Investment Summary" means, to the extent available, the set
of information provided to the investment committee of the Borrower's board of
trustees in connection with the purchase or acquisition of a Property. The
Executive Investment Summary shall include, at a minimum, the following
information relating to such Property: (a) a description of such Property, such
description to include the age, location, site plan, color photographs and
current occupancy rate of such Property; (b) the purchase price paid or to be
paid for such Property; (c) the capitalization rate for such Property; (d) a
summary of the existing tenants of such Property; (d) either current operating
statements for such Property for the immediately preceding fiscal year and for
current fiscal year through the fiscal quarter most recently ending (to the
extent reasonably available to Borrower) or pro forma operating statements for
such Property; and (e) other demographics and trade information relating to such
Property.
"Extension Fee" has the meaning given that term in Section 3.1(b).
"Extension Request" has the meaning given that term in Section 2.11.
"Federal Funds Rate" means, on any day, the rate per annum (rounded
upward, if necessary, to the nearest 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 Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is published on such next succeeding Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to Agent on
such day on such transactions as reasonably determined by Agent.
"FIRREA" means the Financial Institution Recovery Reform and
Enforcement Act of 1989, as amended.
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"Funds from Operations" means, as of any period for a Person, gross
revenues (excluding unforfeited security deposits) of such Person, less all
disbursements of such Person characterized as expenses and all proper charges
against income, plus depreciation and deferred taxes, reserves and other
non-cash charges (except for amortization of deferred finance costs) of such
Person; provided, that there shall not be included in such revenues (a) any
proceeds of any insurance policy other than rental or business interruption
insurance received by such Person, (b) any gain which is classified as
"extraordinary" in accordance with GAAP, (c) any capital gains, or (d)
non-recurring items of income (or expense) relating to mergers and potential
acquisitions acceptable to Majority Lenders in their reasonable discretion. The
components of Funds from Operations shall not be increased or decreased by gains
or losses from sales of property. Funds from Operations shall be calculated on a
consolidated basis for Borrower and any of its Subsidiaries in accordance with
GAAP. Adjustments for Unconsolidated Affiliates will be calculated to reflect
funds from operations on the same basis.
"GAAP" means, as to a particular Person, such accounting practice as,
in the opinion of the independent accountants of recognized national standing
regularly retained by such Person and acceptable to Agent, conforms at the time
to generally accepted accounting principles, consistently applied. Generally
Accepted Accounting Principles means those principles and practices (a) which
are recognized as such by the Financial Accounting Standards Board, (b) which
are applied for all periods after the date hereof in a manner consistent with
the manner in which such principles and practices were applied to the most
recent audited financial statements of the relevant Person furnished to Lenders
or where a change therein has been concurred in by such Person's independent
auditors, and (c) which are consistently applied for all periods after the date
hereof so as to reflect properly the financial condition, and results of
operations and changes in financial position, of such Person. If there is a
change in such accounting practice as to Borrower that could affect Borrower's
ability to comply with the terms of this Agreement, the parties hereto agree to
review and discuss such changes in accounting practice and the terms of this
Agreement for a period of no more than thirty (30) days with a view to amending
this Agreement so that the financial measures of Borrower's operating
performance and financial condition are substantially the same after such change
as they were immediately before such change.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or any Subsidiary, or
any of its or their business, operations or properties.
"Gross Asset Value" means, at a given time, the sum of (a) Adjusted
Asset Value at such time, plus (b) all cash and cash equivalents of Borrower and
its Consolidated Subsidiaries at such time (excluding tenant deposits and other
cash and cash equivalents the disposition of which is restricted in any way
(excluding restrictions in the nature of early withdrawal penalties)), plus (c)
the current book value of all real property of Borrower and its Consolidated
Subsidiaries held for development or upon which construction is then in
progress, plus (d) the contractual purchase price of properties subject to
purchase obligations, repurchase obligations, and forward commitments to the
extent the obligations are included in the Borrower's or any Consolidated
Subsidiary's Total Liabilities.
7
<PAGE>
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
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 (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness 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.
"Guarantor" means all Subsidiaries of Borrower and each other Person
who has executed and delivered the Guaranty.
"Guaranty" means the Guaranty executed by each Guarantor in favor of
Agent and Lenders and substantially in the form of Exhibit B.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, waste or contaminant, including asbestos and
petroleum, its derivatives, by-products and other hydrocarbons, or any substance
or material having any constituent elements displaying any of the foregoing
characteristics, which are defined in or identified or regulated by any
Environmental Laws.
"Indebtedness" of any Person means at any date, without duplication,
(a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(c) all obligations of such Person to pay the deferred purchase price of
property or services, (d) all Capitalized Lease Obligations of such Person, (e)
all Indebtedness secured by a Lien on any asset of such Person, whether or not
such Indebtedness is otherwise an obligation of such Person, (f) all
reimbursement obligations of such Person under any letters of credit or
acceptances (whether or not the same have been presented for payment); (g) such
Person's proportionate share of Indebtedness of any Unconsolidated Affiliate of
such Person, which Indebtedness such Person is obligated on a non-recourse
basis; (h) all indebtedness of any other Person of which such Person is a
general partner; and (i) all Indebtedness of any such Unconsolidated Affiliate,
which Indebtedness such Person has Guaranteed or is otherwise obligated on a
recourse basis.
"Intangible Assets" means, with respect to any Person (to the extent
reflected in determining stockholders' equity of such Person) (a) deferred
charges, (b) the amount of any write-up in the book value of any assets
contained in any balance sheet resulting from revaluation thereof or any
write-up in excess of the cost of such assets acquired, and (c) the aggregate of
all amounts appearing on the assets side of any such balance sheet for
franchises, licenses, permits, patents, patent applications, copyrights,
trademarks, trade names, goodwill, treasury stock, experimental or
organizational expenses and other like intangibles.
8
<PAGE>
"Interest Expense" means, for any Person and for any period, all paid
or accrued interest expense of such Person for such period and shall include (a)
all paid or accrued interest expense in respect of Indebtedness and other
liabilities which such Person has Guaranteed or is otherwise obligated whether
or not on a recourse basis (b) such Person's proportionate share of all paid or
accrued interest expense for such period of Unconsolidated Affiliates of such
Person, (c) costs related to Interest Rate Agreements, but shall not include
capitalized interest on Reserved Construction Loans for such period, and (d)
fees and other expenses related to the issuance of letters of credit.
"Interest Period" means with respect to any LIBOR Loan, the period
commencing on the date of the borrowing, Conversion or Continuation of such Loan
and ending on the last day of the period selected by Borrower pursuant to the
provisions below. The duration of each Interest Period shall be one, two, three
or six months (and if approved by all Lenders, 12 months), in each case Borrower
may, in an appropriate Notice of Borrowing, Notice of Continuation or Notice of
Conversion, select. In no event shall an Interest Period of a Revolving Loan
extend beyond the Maturity Date. Whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day;
provided, however, that if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding Business Day.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
contractual agreement or arrangement entered into by Borrower or any Subsidiary
with a nationally recognized then rated investment grade financial institution
for the purpose of protecting Borrower or such Subsidiary against fluctuations
in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means, with respect to any Person and whether or not such
investment constitutes a controlling interest in such Person: (a) the purchase
or other acquisition of any share of capital stock or other equity interest,
evidence of Indebtedness or other security issued by any other Person; (b) any
loan, advance or extension of credit to, or contribution to the capital of, any
other Person; (c) any Guarantee of the Indebtedness of any other Person; (d) the
subordination of any claim against a Person to other Indebtedness of such
Person; and (e) any other investment in any other Person.
"Issuing Bank" means Agent or an affiliate of Agent, as the issuer of
Letters of Credit hereunder.
9
<PAGE>
"Issuing Bank Fees" means the Fees payable to the Issuing Bank pursuant
to the last sentences of Section 3.1(c) and (d).
"L/C Commitment Amount" means an amount equal to $10,000,000.00
"Lending Office" means, for each Lender and for each Type of Loan, the
office of such Lender specified as such on its signature page hereto, or in any
applicable Assignment or Acceptance Agreement or such other office of such
Lender as such Lender may notify the Agent from time to time.
"Letter of Credit" has the meaning set forth in Section 2.13(a).
"Letter of Credit Documents" means, with respect to any Letter of
Credit, collectively, any application therefor, any certificate or other
document presented in connection with a drawing under such Letter of Credit and
any other agreement, instrument or other document governing or providing for (a)
the rights and obligations of the parties concerned or at risk with respect to
such Letter of Credit or (b) any collateral security for any of such
obligations.
"Letter of Credit Liabilities" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (a) the Stated Amount of
such Letter of Credit plus (b) the aggregate unpaid principal amount of all
Reimbursement Obligations of Borrower at such time due and payable in respect of
all drawings made under such Letter of Credit. For purposes of this Agreement, a
Lender shall be deemed to hold a Letter of Credit Liability in an amount equal
to its participation interest in the related Letter of Credit under Section
2.13(f).
"LIBO Rate" means, with respect to each Interest Period, the average
rate of interest per annum (rounded upwards, if necessary, to the next highest
1/16th of 1%) at which deposits in immediately available funds in Dollars are
offered to Agent (at approximately 10:00 a.m., two Business Days prior to the
first day of such Interest Period) by first class banks in the interbank
Eurodollar market, for delivery on the first day of such Interest Period, such
deposits being for a period of time equal or comparable to such Interest Period
and in an amount equal to or comparable to the principal amount of the LIBOR
Loan to which such Interest Period relates. Each determination of the LIBO Rate
by Agent shall, in absence of demonstrable error, be conclusive and binding.
"LIBOR Loan" means any Revolving Loan hereunder with respect to which
the interest rate is calculated by reference to the LIBO Rate for a particular
Interest Period.
"Lien" as applied to the property of any Person means: (a) any
mortgage, deed to secure debt, deed of trust, pledge, lien, charge or lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest, security title or encumbrance
of any kind in respect of any property of such Person, or upon the income or
profits therefrom; (b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to the payment of the general, unsecured
creditors of such Person; and (c) the filing of, or any agreement to give, any
financing statement under the Uniform Commercial Code or its equivalent in any
jurisdiction.
10
<PAGE>
"Loan" means a Revolving Loan.
"Loan Document" means this Agreement, each of the Notes, each Letter of
Credit, each of the Guaranties, any agreement evidencing the fees referred to in
Section 3.1(c) and each other document or instrument executed and delivered by
any Loan Party in connection with this Agreement or any of the other foregoing
documents.
"Loan Party" means each of Borrower, each Guarantor, and each other
Person who guarantees all or a portion of the Obligations and/or who pledges any
collateral security to secure all or a portion of the Obligations.
"Major Agreements" means, at any time, (a) each Property Management
Agreement with respect to a Pool Property and (b) any other agreement which in
any way relates to the use, occupancy, operation, maintenance, enjoyment or
ownership of an Unencumbered Pool Property, the breach or loss of which would
have a Materially Adverse Effect.
"Major Space Lease" means a lease of space in any Real Property which
represents more than fifteen percent (15%) of the net rentable space in such
Pool Property.
"Majority Lenders" means, as at any time, Lenders having at least
66-2/3% of the aggregate amount of the Commitments or, if the Commitments have
been terminated or reduced to zero, Lenders holding at least 66-2/3% of the
principal amount of the Loans and Letter of Credit Liabilities.
"Materially Adverse Effect" means a materially adverse effect on (a)
the business, assets, liabilities, financial condition, or results of operations
of Borrower and its Consolidated Subsidiaries taken as a whole, (b) the ability
of any Loan Party to perform its obligations under any Loan Document to which it
is a party, (c) the validity or enforceability of any of such Loan Documents,
(d) the rights and remedies of Lenders and Agent under any of such Loan
Documents or (e) the timely payment of the principal of or interest on the Loans
or other amounts payable in connection therewith. Except with respect to
representations made or deemed made by Borrower under Article 6. or in any of
the other Loan Documents to which any Loan Party is a party, all determinations
of materiality shall be made by Agent in its reasonable judgment unless
expressly provided otherwise.
"Maximum Loan Availability" means, at any time, the least of (a) the
amount, if any, by which (i) the Unencumbered Pool Value divided by 1.75,
exceeds (ii) all Unsecured Liabilities (other than the Loans and the Letter of
Credit Liabilities) of Borrower and its Consolidated Subsidiaries, (b) the
aggregate amount of the Commitments, and (c) for the period from the Effective
Date until the date which is 60 days after such date, $15,000,000.00 plus any
increase in the Unencumbered Pool Value from the Effective Date at the time of
determination thereof.
11
<PAGE>
"Mortgage" means a mortgage, deed of trust or deed to secure debt or
similar security instrument made by a Person owning an interest in real estate
granting a Lien or such interest in real estate as security for the payment of
Indebtedness.
"Net Operating Income" means, for any Property for the period in
question, but without duplication, the sum of (a) rents and other revenues
received in the ordinary course from such Property (including amounts received
from tenants as reimbursements for common area maintenance, taxes and insurance
and proceeds of rent loss insurance but excluding pre-paid rents and revenues
and security deposits except to the extent applied in satisfaction of tenants'
obligations for rent) minus (b) all expenses paid or accrued related to the
ownership, operation or maintenance of such property, including but not limited
to taxes, assessments and the like, insurance, utilities, payroll costs,
maintenance, repair and landscaping expenses, marketing expenses, and general
and administrative expenses (including an appropriate allocation for legal,
accounting, advertising, marketing and other expenses incurred in connection
with such property, but specifically excluding general overhead expenses of
Borrower and any property management fees) minus (c) the Capital Expenditures
Reserve for such Property as of the end of such period minus (d) the greater of
(i) the actual property management fee paid during such period and (ii) an
imputed management fee in the amount of one percent (1.0%) of the gross revenues
for such Property for such period, in each case determined in accordance with
GAAP.
"Net Worth" means, for any Person and as of a given date, (a) ninety
percent (90%) of such Person's total stockholder's equity plus (b) all
depreciation and amortization of such Person after June 30, 1998 minus (c) all
Intangible Assets of such Person, all as determined in accordance with GAAP.
"Non-ERISA Plan" means any Plan subject to Section 4975 of the Internal
Revenue Code.
"Note" means a Revolving Note.
"Notice of Borrowing" means a notice in the form of Exhibit D to be
delivered to Agent pursuant to Section 2.2 evidencing Borrower's request for a
Borrowing of Revolving Loans.
"Notice of Continuation" means a notice in the form of Exhibit E to be
delivered to Agent pursuant to Section 2.4 evidencing Borrower's request for the
Continuation of a Borrowing of Revolving Loans.
"Notice of Conversion" means a notice in the form of Exhibit F to be
delivered to Agent pursuant to Section 2.5 evidencing Borrower's request for the
Conversion of a Borrowing of Revolving Loans.
"Obligations" means, individually and collectively: (a) all Loans; (b)
all Reimbursement Obligations and all other Letter of Credit Liabilities; (c)
any and all renewals and extensions of any of the foregoing and (d) all other
indebtedness, liabilities, obligations, covenants and duties of Borrower owing
to Agent and/or Lenders and/or the Issuing Bank of every kind, nature and
description, under or in respect of this Agreement or any of the other Loan
Documents, whether direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any promissory note.
12
<PAGE>
"Occupancy Rate" means, with respect to a Property at any time, the
ratio, expressed as a percentage, of (a) the net rentable square footage of such
Property actually occupied by tenants paying rent pursuant to binding leases as
to which no monetary default has occurred and has been continuing for a period
of 90 or more days to (b) the aggregate net rentable square footage of such
Property.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Distributions" means an amount not exceeding 95% of
Borrower's Funds from Operations for any fiscal quarter during the quarterly
period following the fiscal quarter commencing September 30, 1999 and during any
consecutive fiscal quarter period thereafter.
"Permitted Liens" means (a) Liens granted to Agent to secure the
Obligations, (b) pledges or deposits made to secure payment of worker's
compensation (or to participate in any fund in connection with worker's
compensation insurance), unemployment insurance, pensions or social security
programs, (c) encumbrances consisting of zoning restrictions, easements, or
other restrictions on the use of real property, provided that such items do not
materially impair the use of such property for the purposes intended and none of
which is violated in any material respect by existing or proposed structures or
land use, (d) the following to the extent no Lien has been filed in any
jurisdiction or agreed to: (i) Liens for taxes not yet due and payable; or (ii)
Liens imposed by mandatory provisions of Applicable Law such as for
materialmen's, mechanic's, warehousemen's and other like Liens arising in the
ordinary course of business, securing payment of Indebtedness the payment of
which is not yet due, (e) Liens for taxes, assessments and governmental charges
or assessments that are being contested in good faith by appropriate proceedings
diligently conducted, and for which reserves acceptable to Agent have been
provided, (f) Liens expressly permitted under the terms of the Loan Documents,
and (g) any extension, renewal or replacement of the foregoing to the extent
such Lien as so extended, renewed or replaced would otherwise be permitted
hereunder.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including 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 Internal Revenue Code.
"Pro Rata Share" means, with respect to any Lender, the percentage
obtained by dividing (a) the amount of such Lender's Commitment by (b) the
aggregate amount of Commitments of all Lenders, or, if the Commitments shall
have been terminated, the percentage obtained by dividing (i) the aggregate
unpaid principal amount of Loans and Letter of Credit Liabilities owing to such
Lender by (ii) the aggregate unpaid principal amount of all Loans and Letter of
Credit Liabilities.
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<PAGE>
"Property" means real property improved with one or more operating
retail properties owned directly or indirectly by Borrower.
"Property Management Agreements" means, collectively, all agreements
entered into by Borrower with a Property Manager pursuant to which Borrower
engages such Property Manager to advise Borrower with respect to the management
of an Unencumbered Pool Property.
"Property Manager" means any Person engaged by Borrower under a
Property Management Agreement to advise Borrower with respect to the management
of an Unencumbered Pool Property.
"Regulations T, U and X" means Regulations T, U and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"Reimbursement Obligation" means the absolute, unconditional and
irrevocable obligation of Borrower to reimburse the Issuing Bank for any drawing
honored by the Issuing Bank under a Letter of Credit.
"REIT" means a Person qualifying for treatment as a "real estate
investment trust" under the Internal Revenue Code.
"Reserved Construction Loan" shall mean a construction loan extended to
Borrower or any Subsidiary for the purpose of financing construction of a
Property in respect of which: (a) no default or event of default exists; (b)
interest on such loan has been budgeted to accrue at a rate of not less than the
Base Rate at the time the interest reserve account is established; (c) the
amount of such budgeted interest has been (i) included in the principal amount
of such loan and (ii) segregated into an interest reserve account (which shall
include any arrangement whereby loan proceeds equal to such budgeted interest
are reserved and only disbursed to make interest payments in respect of such
loan); (d) absent an event of default or default, such interest can be paid out
of such interest reserve account only for the purpose of making interest
payments on such loan; and (e) the amount held in such interest reserve account
in respect of such loan, together with the net income, if any, from such
Property projected by Agent will be sufficient, as determined by Agent, to pay
all Interest Expense on such loan until the date that the Net Operating Income
of such Property is anticipated to be sufficient to pay all Interest Expense on
such loan.
"Restricted Payment" means cash payment or other distributions on, or
in respect of, any class of stock of, or other equity interest in, a Person, or
other payments or transfers made in respect of the redemption, repurchase or
acquisition of such stock or equity interest, other than any distribution or
other payment payable solely in capital stock of such Person.
"Revolving Credit Termination Date" means the earlier to occur of (a)
November 10, 1999, or such later date to which such date may be extended in
accordance with Section 2.11 or (b) the date on which the Commitments are
terminated pursuant to Section 9.2.
"Revolving Loan" means a loan made by a Lender to Borrower under
Section 2.1.
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"Revolving Note" means a promissory note executed by Borrower, payable
to the order of a Lender, in an amount equal to such Lender's Commitment and
substantially in the form of Exhibit C.
"Secured Indebtedness" means, with respect to any Person, any
Indebtedness of such Person that is secured in any manner by any Lien on any
real property and shall include such Person's pro rata share of the Secured
Indebtedness of any of such Person's Unconsolidated Affiliates.
"Share" means a transferable unit of beneficial interest in Borrower.
"Solvent" means, when used with respect to any Person, that (a) the
fair value and the fair salable value of its assets (excluding any Indebtedness
due from any Affiliate of such Person) are each in excess of the fair valuation
of its total liabilities (including all contingent liabilities); (b) such Person
is able to pay its debts or other obligations in the ordinary course as they
mature and (c) that the Person has capital not unreasonably small to carry on
its business and all business in which it proposes to be engaged.
"Stated Amount" means the amount available to be drawn by a beneficiary
under a Letter of Credit from time to time, as such amount may be increased or
reduced from time to time in accordance with the terms of such Letter of Credit.
"Subsidiary" means, for any Person, any corporation, partnership or
other entity of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (without regard to the occurrence of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person. "Wholly Owned Subsidiary" means any such
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are so owned or controlled.
"Substantial Amount" means, at the time of determination thereof, an
amount greater than or equal to 15% of the sum of (a) total consolidated assets
of Borrower and its Consolidated Subsidiaries at such time plus (b) consolidated
accumulated depreciation of Borrower and its Consolidated Subsidiaries at such
time.
"Total Liabilities" means, as to any Person, at a particular date, all
liabilities which would, in conformity with GAAP, be properly classified as a
liability on the balance sheet of such Person as at such date, and in any event
shall include (without duplication): (a) all Indebtedness of such Person; (b)
all accounts payable of such Person; (c) all reimbursement obligations of such
Person under any letters of credit or banker's acceptances (whether or not the
same have been presented for payment); (d) all lease obligations (including
without limitation, ground leases) of such Person; (e) all purchase and
repurchase obligations and forward commitments of such Person; (f) all unfunded
obligations of such Person and (g) all Contingent Obligations of such Person.
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"Type" with respect to any Loan, refers to whether such Loan is a LIBOR
Loan or a Base Rate Loan.
"Unconsolidated Affiliate" shall mean, in respect of any Person, any
other Person in whom such Person holds an Investment, which Investment is
accounted for in the financial statements of such Person on an equity basis of
accounting and whose financial results would not be consolidated under GAAP with
the financial results of such Person on the consolidated financial statements of
such Person.
"Unencumbered NOI" means, for any period, the aggregate Net Operating
Income for such period for each Property of Borrower or any Subsidiary which
satisfies all of the following requirements as determined by Agent: (a) such
Property is owned in fee simple by Borrower or a Subsidiary of Borrower; (b)
neither such Property nor any interest of Borrower or such Subsidiary therein,
is subject to any Lien other than Permitted Liens or to any agreement (other
than this Agreement or any other Loan Document) that prohibits the creation of
any Lien thereon as security for Indebtedness; (c) if such Property is owned by
a Subsidiary: (i) none of Borrower's direct or indirect ownership interest in
such Subsidiary is subject to any Lien other than Permitted Liens or to any
agreement (other than this Agreement or any other Loan Document) that prohibits
the creation of any Lien thereon as security for Indebtedness and (ii) neither
such Subsidiary, nor any other Subsidiary through which Borrower holds any
indirect interest in such Subsidiary, is subject to any restriction of any kind
which would limit its ability to pay or perform its obligations under the
Guaranty required to be delivered hereunder prior to its obligation to pay
dividends or make any other distribution on any of such Subsidiary's capital
stock or other securities owned by Borrower or any other Subsidiary of Borrower.
For purposes of this definition, the Unencumbered NOI for any period for any
Property owned by a Subsidiary which is not a Wholly Owned Subsidiary shall be
limited to the Borrower's pro rata share of the distributed Net Operating Income
of such Property for such period.
"Unencumbered Pool Certificate" means a report, certified by the chief
financial officer of Borrower in the manner provided for in Exhibit I, setting
forth the calculations required to establish the Unencumbered Pool Value as of a
specified date, all in form and detail satisfactory to Agent.
"Unencumbered Pool Properties" means those Eligible Properties that
have been approved pursuant to Article 5 for inclusion when calculating the
Maximum Loan Availability.
"Unencumbered Pool Value" means, at any time, the sum of the following
amounts as determined for each Unencumbered Pool Property: (a) the Net Operating
Income of such Unencumbered Pool Property for the fiscal quarter most recently
ended times (b) 4 and divided by (c) 9.5%. Notwithstanding anything set forth in
this definition to the contrary (x) not more than 40% of the total Unencumbered
Pool Value can be attributable to Unencumbered Pool Properties which are not
100% owned by Borrower or Wholly Owned Subsidiaries, and (y) if an Unencumbered
Pool Property has been owned for less than one fiscal quarter, then either (i)
the purchase price of such Unencumbered Pool Property, or (ii) the aggregate
developmental and construction cost of such Unencumbered Pool Property shall be
its Unencumbered Pool Value.
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"Unsecured Indebtedness" means, with respect to a Person, all
Indebtedness of such Person that is not Secured Indebtedness.
"Unsecured Interest Expense" means, with respect to a Person and for a
given period, all Interest Expense for such period attributable to the Unsecured
Indebtedness of such Person.
"Unsecured Liabilities" means, as to any Person as of a given date, (a)
all liabilities which would, in conformity with GAAP, the properly classified as
a liability on the consolidated balance sheet of such Person as at such date
plus (b) all Indebtedness of such Person (to the extent not included in the
preceding clause (a)) minus (c) all Secured Indebtedness of such Person. When
determining the Unsecured Liabilities of Borrower and its Subsidiaries, accounts
payable and accrued dividends payable shall be included only to the extent the
aggregate amount thereof exceeds the aggregate amount of cash and cash
equivalents (excluding tenant deposits and other cash and cash equivalents
Borrower's disposition of which is restricted in any way (excluding restrictions
in the nature of early withdrawal penalties)) then reportable on a consolidated
balance sheet of Borrower.
"Unprotected Floating Rate Debt" means all Indebtedness of Borrower and
its Subsidiaries (including, without limitation, Indebtedness of Unconsolidated
Affiliates of Borrower or any Subsidiary which Indebtedness is recourse to
Borrower or such Subsidiary) which bears interest at fluctuating rates and for
which Borrower or such Subsidiary has not obtained Interest Rate Agreements
which effectively cause such variable rates to be equivalent to fixed rates or
to not otherwise exceed 9.5% per annum.
SECTION 1.2. Accounting Terms and Determinations; Covenant
Calculations.
Unless otherwise specified herein, all accounting terms 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.
SECTION 1.3. Subsidiaries.
Unless explicitly set forth to the contrary, a reference to
"Subsidiary" shall mean a Subsidiary of Borrower and a reference to an
"Affiliate" shall mean a reference to an Affiliate of Borrower.
SECTION 1.4. Interpretation Generally; Times.
References in this Agreement to "Sections", "Articles", "Exhibits" and
"Schedules" are to sections, articles, exhibits and schedules herein and hereto
unless otherwise indicated. References in this Agreement or any other Loan
Document to any document, instrument or agreement (a) shall include all
exhibits, schedules and other attachments thereto, as updated from time to time,
(b) shall include all documents, instruments or agreements issued or executed in
replacement thereof, and (c) shall mean such document, instrument or agreement,
or replacement or predecessor thereto, as amended, modified or supplemented from
time to time in accordance with its terms and in effect at any given time.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter. Unless otherwise indicated, all references to time are
references to San Francisco, California time.
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ARTICLE 2.
CREDIT FACILITY
SECTION 2.1. Making of Revolving Loans.
2.1.1. Subject to the terms and conditions set forth in this Agreement
including, without limitation, Section 2.1(b), each Lender severally agrees to
make Revolving Loans to Borrower during the period from and including the
Effective Date to but excluding the Revolving Credit Termination Date, in an
aggregate principal amount at any one time outstanding up to, but not exceeding,
the lesser of (a) such Lender's Pro Rata Share of the Maximum Loan Availability
and (b) such Lender's Commitment. Each borrowing of Revolving Loans hereunder
shall be in an aggregate principal amount of (i) with respect to Base Rate
Loans, $100,000.00 and integral multiples of $50,000.00 in excess of that amount
(except that any such borrowing of Base Rate Loans may be in the aggregate
amount of the unused Commitments) and (ii) with respect to LIBOR Loans,
$250,000.00 and integral multiples of $100,000.00 in excess of that amount.
Within the foregoing limits and subject to the other terms of this Agreement,
Borrower may borrow, repay and reborrow Revolving Loans.
2.1.2. Notwithstanding any other term of this Agreement or any other
Loan Document, at no time may the aggregate principal amount of all outstanding
Revolving Loans, together with the aggregate amount of all Letter of Credit
Liabilities, exceed the lesser of (a) Maximum Loan Availability at such time or
(b) the aggregate amount of the Lenders' Commitments.
SECTION 2.2. Requests for Revolving Loans.
Not later than 10:00 a.m. at least one Business Day prior to a
borrowing of Base Rate Loans and not later than 10:00 a.m. at least three
Business Days prior to a borrowing of LIBOR Loans, Borrower shall deliver to
Agent a Notice of Borrowing. Each Notice of Borrowing shall specify the
principal amount of the Revolving Loans to be borrowed, the date such Revolving
Loans are to be borrowed (which must be a Business Day), the use of the proceeds
of such Revolving Loans, the Type of the requested Revolving Loans and if such
Revolving Loans are to be LIBOR Loans, the initial Interest Period for such
Revolving Loans. Each Notice of Borrowing shall be irrevocable once given and
binding on Borrower. Prior to delivering a Notice of Borrowing, Borrower may
(without specifying whether a Revolving Loan will be a Base Rate Loan or a LIBOR
Loan) request that Agent provide Borrower with the most recent LIBO Rate
available to Agent. Agent shall provide such quoted rate to Borrower and to
Lenders on the date of such request or as soon as possible thereafter.
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SECTION 2.3. Funding.
2.3.1. Promptly after receipt of a Notice of Borrowing under Section
2.2, Agent shall notify each Lender by telex or telecopy, or other similar form
of transmission of the proposed borrowing. Each Lender shall deposit an amount
equal to the Revolving Loan to be made by it with Agent at Agent's Lending
Office, in immediately available funds not later than 10:00 a.m. on the date of
such proposed Revolving Loans. Upon and subject to fulfillment of all applicable
conditions set forth herein, Agent shall make available to Borrower at Agent's
Lending Office, not later than 11:00 a.m. on the date of the requested Revolving
Loans, the proceeds of such amounts received by Agent. The failure of any Lender
to deposit the amount described above with Agent shall not relieve any other
Lender of its obligations hereunder to make its Revolving Loan.
2.3.2. Unless Agent shall have been notified by any Lender that such
Lender will not make available to Agent the Revolving Loan to be made by such
Lender on such date, Agent may in its discretion assume that such Lender will
make the proceeds of such Revolving Loan available to Agent on the date of the
requested borrowing as set forth in the Notice of Borrowing and Agent may (but
shall not be obligated to), in reliance upon such assumption, make available to
Borrower the amount of such Revolving Loan to be provided by such Lender.
SECTION 2.4. Continuation.
So long as no Event of Default shall have occurred and be continuing,
Borrower may on any Business Day, with respect to any LIBOR Loan, elect to
maintain such LIBOR Loan or any portion thereof as a LIBOR Loan by selecting a
new Interest Period for such LIBOR Loan. Each new Interest Period selected under
this Section shall commence on the last day of the immediately preceding
Interest Period. Each selection of a new Interest Period shall be made by
Borrower's giving of a Notice of Continuation not later than 10:00 a.m. on the
third Business Day prior to the date of any such Continuation by Borrower to
Agent. Promptly after receipt of a Notice of Continuation, Agent shall notify
each Lender by telex or telecopy, or other similar form of transmission of the
proposed Continuation. Such notice by Borrower of a Continuation shall be by
telephone or telecopy, confirmed immediately in writing if by telephone, in the
form of a Notice of Continuation, specifying (a) the date of such Continuation,
(b) the LIBOR Loan and portion thereof subject to such Continuation and (c) the
duration of the selected Interest Period, all of which shall be specified in
such manner as is necessary to comply with all limitations on Loans outstanding
hereunder. Each Notice of Continuation shall be irrevocable by and binding on
Borrower once given. If Borrower shall fail to select in a timely manner a new
Interest Period for any LIBOR Loan in accordance with this Section, such Loan
will automatically, on the last day of the current Interest Period therefore,
Convert into a Base Rate Loan notwithstanding failure of Borrower to comply with
Section 2.5.
SECTION 2.5. Conversion.
So long as no Event of Default shall have occurred and be continuing,
Borrower may on any Business Day, upon Borrower's giving of a Notice of
Conversion to Agent, Convert the entire amount of all or a portion of a Loan of
one Type into a Loan of another Type. Promptly after receipt of a Notice of
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Conversion, Agent shall notify each Lender by telex or telecopy, or other
similar form of transmission of the proposed Conversion. Any Conversion of a
LIBOR Loan into a Base Rate Loan shall be made on, and only on, the last day of
an Interest Period for such LIBOR Loan. Each such Notice of Conversion shall be
given not later than 10:00 a.m. on the Business Day prior to the date of any
proposed Conversion into Base Rate Loans and on the third Business Day prior to
the date of any proposed Conversion into LIBOR Loans. Subject to the
restrictions specified above, each Notice of Conversion shall be by telephone or
telecopy confirmed immediately in writing if by telephone in the form of a
Notice of Conversion specifying (a) the requested date of such Conversion, (b)
the Type of Loan to be Converted, (c) the portion of such Type of Loan to be
Converted, (d) the Type of Loan such Loan is to be Converted into and (e) if
such Conversion is into a LIBOR Loan, the requested duration of the Interest
Period of such Loan. Each Notice of Conversion shall be irrevocable by and
binding on Borrower once given. Each Conversion from a Base Rate Loan to a LIBOR
Loan shall be in an aggregate amount for the Loans of all Lenders of not less
than $250,000.00 or integral multiples of $100,000.00 in excess of that amount.
SECTION 2.6. Interest Rate.
2.6.1. All Loans. The unpaid principal of each Base Rate Loan shall
bear interest from the date of the making of such Loan to but not including the
date of repayment thereof at a rate per annum equal to the Base Rate in effect
from day to day. The unpaid principal of each LIBOR Loan shall bear interest
from the date of the making of such Loan to but not including the date of
repayment thereof at a rate per annum equal to the Adjusted LIBO Rate for the
Interest Period therefor.
2.6.2. Default Rate. Notwithstanding the immediately preceding
subsection (a), effective immediately upon the occurrence and during the
continuance of any Event of Default, the outstanding principal balance of the
Loans and all Reimbursement Obligations, and to the extent permitted by
Applicable Law any interest payments on the Loans not paid when due, shall bear
interest payable on demand until paid at the Base Rate from time to time in
effect plus four percent (4.0%).
SECTION 2.7. Special Provisions for LIBOR Loans.
2.7.1. Inadequacy of LIBOR Pricing. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any LIBO Rate for any
Interest Period:
2.7.1.1. Agent reasonably determines, which determination
shall be conclusive, that quotations of interest rates for the relevant
deposits referred to in the definition of LIBO Rate are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for LIBOR Loans as provided
herein; or
2.7.1.2. any Lender reasonably determines, which determination
shall be conclusive, and notifies Agent that the relevant rates of
interest referred to in the definition of LIBO Rate upon the basis of
which the rate of interest for LIBOR Loans for such Interest Period is
to be determined are not likely adequately to cover the cost to such
Lender of making or maintaining LIBOR Loans for such Interest Period;
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then Agent shall give Borrower and each Lender prompt notice thereof and, so
long as such condition remains in effect, Lenders shall be under no obligation
to, and shall not, make additional LIBOR Loans, Continue LIBOR Loans or Convert
Base Rate Loans into LIBOR Loans and Borrower shall, on the last day of each
current Interest Period for each outstanding LIBOR Loan, either prepay such Loan
or Convert such Loan into a Base Rate Loan in accordance with Section 2.5.
2.7.2. Number of Interest Periods. Anything herein to the contrary
notwithstanding, there shall not be outstanding at any one time more than six
(6) Interest Periods.
2.7.3. Illegality of LIBOR Loans. If, after the date of this Agreement,
the adoption of any Applicable Law, rule or regulation, or any change therein,
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, or compliance by any Lender with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Lender to make, maintain or fund LIBOR Loans, such Lender
shall forthwith give notice thereof to Agent and Borrower. Before giving any
notice pursuant to this subsection, such Lender shall designate a different
LIBOR lending office if such designation will avoid the need for giving such
notice and will not be otherwise materially disadvantageous to any such Lender
(as determined in the reasonable judgment of such Lender). Upon receipt of such
notice, Borrower shall either (i) exercise its rights under Section 2.14 with
respect to such Lender, or (ii) Convert such Lender's LIBOR Loans to Base Rate
Loans, on either (A) the last day of the then-current Interest Period applicable
to such LIBOR Loan if such Lender may lawfully continue to maintain and fund
such LIBOR Loan to such day or (B) immediately if such Lender may not lawfully
continue to fund and maintain such LIBOR Loan to such day.
2.7.4. Consequential Losses. Borrower shall indemnify Agent and each
Lender against any Consequential Loss incurred by Agent and each Lender as a
result of (i) any failure to fulfill, on or before the date specified for such
Loan in the applicable Notice of Borrowing, the conditions to such Loan set
forth herein, or (ii) Borrower's requesting that a Base Rate Loan not be
Converted into a LIBOR Loan on the date specified for such Conversion in a
Notice of Conversion, (iii) Borrower's requesting that a LIBOR Loan not be
Continued on the date specified for such Continuation in a Notice of
Continuation or (iv) Borrower's requesting that a LIBOR Loan not be made on the
date specified for such LIBOR Loan in the Notice of Borrowing. A certificate of
Agent and each Lender establishing the amount due from Borrower according to the
preceding sentence, together with a description in reasonable detail of the
manner in which such amount has been calculated, shall be prima facie evidence
thereof.
2.7.5. Increased Costs for LIBOR Loans. If, after the date hereof, any
Governmental Authority, central bank or other comparable authority, shall at any
time impose, modify or deem applicable any reserve (including, without
limitation, any imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Lender, or shall impose on any
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Lender (or its eurodollar lending office) or the interbank eurodollar market any
other condition affecting its LIBOR Loans, such Lender's Note or its obligation
to make LIBOR Loans; and the result of any of the foregoing is to increase the
cost to such Lender of making or maintaining its LIBOR Loans, or to reduce the
amount of any sum received or receivable by such Lender under this Agreement, or
under such Lender's Note, by an amount reasonably deemed by such Lender to be
material, then, within five days after demand by such Lender, Borrower shall pay
to such Lender such additional amount or amounts as will compensate such Lender
for such increased cost or reduction. Such Lender will (i) notify Agent and
Borrower of any event occurring after the date of this Agreement which will
entitle such Lender to compensation pursuant to this subsection as promptly as
practicable (but in any event within 120 days) after such Lender obtains actual
knowledge of such event, and Borrower shall not be liable for any such increased
costs that accrue between the date such notification is required to be given and
the date it was actually given and (ii) use good faith and reasonable efforts to
designate a different lending office for such Lender's LIBOR Loans if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the reasonable opinion of such Lender, be materially
disadvantageous to such Lender (provided that any such foreign Lender shall have
no obligation to so designate a lending office located in the United States of
America). A certificate of such Lender claiming compensation under this Section
and setting forth in reasonable detail the calculation of the additional amount
or amounts to be paid to it hereunder shall be prima facie evidence thereof.
2.7.6. Effect on Base Rate Loans. If notice has been given pursuant to
Section 2.7(a) or (c) requiring LIBOR Loans of a Lender to be repaid or
Converted, then unless and until Agent notifies Borrower that the circumstances
giving rise to such repayment no longer apply, all Loans shall be Base Rate
Loans. If Agent notifies Borrower that the circumstances giving rise to such
repayment no longer apply, Borrower may thereafter select Loans from such Lender
to be LIBOR Loans.
2.7.7. Payments Not at End of Interest Period. If Borrower makes any
payment of principal with respect to any LIBOR Loan of a Lender on any day other
than the last day of an Interest Period applicable to such LIBOR Loan, then
Borrower shall reimburse such Lender on demand the Consequential Loss incurred
by such Lender as a result of the timing of such payment. A certificate of Agent
setting forth in reasonable detail the basis for the determination of the amount
of Consequential Loss shall be delivered to Borrower by Agent and shall, in the
absence of demonstrable error, be conclusive and binding. Any Conversion of a
LIBOR Loan to a Base Rate Loan on any day other than the last day of the
Interest Period for such LIBOR Loan shall be deemed a payment for purposes of
this subsection.
SECTION 2.8. Capital Adequacy.
If, after the date hereof, any Lender shall have determined that either
(a) the adoption of any law, rule, regulation or guideline of general
applicability regarding capital adequacy, or any change therein, 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, or (b) compliance by such Lender (or any lending office
of such Lender) with any request or directive of general applicability regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
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rate of return on such Lender's capital as a consequence of its or Borrower's
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount reasonably
deemed by such Lender to be material, then from time to time, within ten days
after demand by such Lender, which demand shall include a calculation and a
reference to the law, rule or regulation, Borrower shall pay to such Lender such
additional amount or amounts as will adequately compensate such Lender for such
reduction. Such Lender will notify Agent and Borrower of any such determination
which will entitle such Lender to compensation pursuant to this subsection as
promptly as practicable (but in any event within 120 days) after such Lender
obtains actual knowledge of the event or condition prompting such Lender to make
such determination, and Borrower shall not be liable for any such amount or
amounts that accrue between the date such notification is required to be given
and the date it was actually given. A certificate of such Lender claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder, together with the description of the manner
in which such amounts have been calculated, shall be prima facie evidence
thereof. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
SECTION 2.9. Repayment of Loans.
2.9.1. Payment of Interest. All accrued and unpaid interest on the
unpaid principal amount of each Loan shall be payable (i) monthly in arrears on
the first day of each month, commencing with the first full calendar month
occurring after the Effective Date, (ii) on the Revolving Credit Termination
Date and (iii) on any date on which the principal balance of such Loan is due
and payable in full.
2.9.2. Payment of Principal of Revolving Loans. The aggregate
outstanding principal balance of all Revolving Loans shall be due and payable in
full on the Revolving Credit Termination Date.
2.9.3. Optional Prepayments. Borrower may, upon at least one Business
Day's prior notice to Agent, prepay any Loan in whole at any time, or from time
to time in part in an amount equal to $100,000.00 or integral multiples of
$50,000.00 in excess of that amount, by paying the principal amount to be
prepaid. If Borrower shall prepay the principal of any LIBOR Loan on any date
other than the last day of the Interest Period applicable thereto, Borrower
shall pay the amounts, if any, due under Section 2.7(d).
2.9.4. Mandatory Prepayments. If at any time the aggregate principal
amount of all outstanding principal balances of Revolving Loans, together with
the aggregate amount of Letter of Credit Liabilities, exceeds the aggregate
amount of the Commitments in effect at such time, Borrower shall promptly upon
demand pay to Agent for the accounts of the Lenders the amount of such excess.
If at any time the aggregate outstanding principal balances of Revolving Loans
together with the aggregate amount of all Letter of Credit Liabilities, exceeds
the Maximum Loan Availability, then Borrower shall, within 10 days of Borrower
obtaining actual knowledge of the occurrence of such excess, deliver to Agent
and each Lender a written plan acceptable to Lenders to eliminate such excess
(whether by designation of additional Properties as Unencumbered Pool
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Properties, by Borrower repaying an appropriate amount of Loans, or otherwise).
If such excess is not eliminated within 30 days of Borrower obtaining actual
knowledge of the occurrence thereof, then the entire outstanding principal
balance of all Loans and all accrued interest thereon, together with an amount
equal to all Letter of Credit Liabilities for deposit into the Collateral
Account, shall be immediately due and payable in full.
2.9.5. General Provisions as to Payments. Except to the extent
otherwise provided herein, all payments of principal, interest and other amounts
to be made by Borrower under this Agreement, the Notes or any other Loan
Document shall be made in Dollars, in immediately available funds, without
setoff, deduction or counterclaim, to Agent at its Lending Office, not later
than 11:00 a.m. on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day). All payments to be made by Borrower to the
Issuing Bank under this Agreement or any other Loan Document shall be made in
Dollars, in immediately available funds, without setoff, deduction or
counterclaim, to the Issuing Bank, not later than 11:00 a.m. on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day). The parties agree that if Borrower makes any payment due hereunder after
11:00 a.m. but before 5:00 p.m. on the date such payment is due, such late
payment shall not constitute a Default under Section 9.1(a) but shall
nevertheless for all other purposes, including but not limited to, the
calculation of interest and any fees payable pursuant to Section 3.1(a), be
deemed to have been paid as of the next succeeding Business Day as provided in
the applicable parenthetical phrase of the preceding sentences. Each payment
received by Agent for the account of a Lender under this Agreement or any Note
shall be paid to such Lender, by wire transfer of immediately available funds in
accordance with the wiring instructions provided by such Lender to the Agent
from time to time, for the account of such Lender at the applicable Lending
Office of such Lender. In the event Agent fails to pay such amounts to such
Lender within one Business Day of receipt by Agent, Agent shall pay interest on
such amount at a rate per annum equal to the Federal Funds Rate from time to
time in effect. If the due date of any payment under this Agreement or any other
Loan Document would otherwise fall on a day which is not a Business Day such
date shall be extended to the next succeeding Business Day and interest shall be
payable for the period of such extension.
SECTION 2.10. Voluntary Reductions of the Commitments.
Borrower may terminate or reduce the aggregate unused amount of the
Commitments (for which purpose use of the Commitments shall be deemed to include
the aggregate amount of all Letter of Credit Liabilities) at any time and from
time to time without penalty or premium upon not less than three Business Days
prior notice to Agent of each such termination or reduction, which notice shall
specify the effective date thereof and the amount of any such reduction (which
in the case of any partial reduction of the Commitments shall not be less than
$100,000.00 and integral multiples of $50,000.00 in excess of that amount) and
shall be irrevocable once given and effective only upon receipt by Agent;
provided, however, that if Borrower seeks to reduce the aggregate amount of the
Commitments below $2,000,000.00, then the Commitments shall be reduced to zero
and except as otherwise provided herein, the provisions of this Agreement shall
terminate. The Commitments, once reduced pursuant to this Section, may not be
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increased. Borrower shall pay all interest and other costs on the Revolving
Loans accrued to the date of such reduction or termination of the Commitments to
Agent for the account of Lenders.
SECTION 2.11. Extension of Revolving Credit Termination Date.
Borrower may request Agent and Lenders to extend the current Revolving
Credit Termination Date for one three-month period by executing and delivering
to Agent at least 90 days but no more than 120 days prior to the then-current
Revolving Credit Termination Date, a written request in the form of Exhibit G
(an "Extension Request"). Agent shall forward to each Lender and the Issuing
Bank a copy of any Extension Request delivered to Agent promptly upon receipt
thereof. So long as (a) Borrower has completed the consolidation of a majority
(determined by using the weighted average of the relative Unencumbered NOI for
such Unencumbered Pool Properties) of all of the Unencumbered Pool Properties
shown on Schedule 2.11 into Borrower or a Wholly Owned Subsidiary of Borrower,
(b) no Event of Default shall have occurred and be continuing at the time such
Extension Request is received by the Agent, and (c) Borrower shall have
concurrently with delivery of the Extension Request paid to Agent the Extension
Fee in accordance with Section 3.1(b), the Revolving Credit Termination Date
shall thereupon be extended for three months.
SECTION 2.12. Notes.
The obligation of Borrower to repay the Revolving Loans shall, in
addition to this Agreement, be evidenced by the Revolving Notes.
SECTION 2.13. Letters of Credit.
2.13.1. Letters of Credit. Subject to the terms and conditions of this
Agreement including, without limitation, Section 2.1(b), Agent agrees to cause
the Issuing Bank, on behalf of Lenders, to issue for the account of Borrower
during the period from and including the Effective Date to, but excluding, the
Revolving Credit Termination Date one or more letters of credit (each a "Letter
of Credit") in such form and containing such terms as may be requested from time
to time by Borrower and acceptable to the Issuing Bank and Agent, up to a
maximum aggregate Stated Amount at any one time outstanding not to exceed the
L/C Commitment Amount.
2.13.2. Terms of Letters of Credit. At the time of issuance, the
amount, terms and conditions of each Letter of Credit, and of any drafts or
acceptances thereunder, shall be subject to approval by the Issuing Bank, Agent
and Borrower. Notwithstanding the foregoing, in no event may (i) the expiration
date of any Letter of Credit extend beyond the Revolving Credit Termination
Date, (ii) a Letter of Credit have an initial duration in excess of one year,
(iii) a Letter of Credit contain an automatic renewal clause or (iv) a Letter of
Credit be issued within 30 days of the Revolving Credit Termination Date. The
initial Stated Amount of each Letter of Credit shall be at least $100,000.00.
2.13.3. Requests for Issuance of Letters of Credit. In connection with
the proposed issuance of a Letter of Credit, Borrower shall give Agent written
notice (or telephonic notice promptly confirmed in writing) prior to the
requested date of issuance of a Letter of Credit, such notice to describe in
reasonable detail the proposed terms of such Letter of Credit and the nature of
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the transactions or obligations proposed to be supported by such Letter of
Credit, and in any event shall set forth with respect to such Letter of Credit
(i) the proposed initial Stated Amount, (ii) the beneficiary, (iii) whether such
Letter of Credit is a commercial or standby letter of credit and (iv) the
proposed expiration date. Borrower shall also execute and deliver such customary
applications and agreements for standby letters of credit, standby letter of
credit agreements, applications for amendment to letter of credit, and other
forms as requested from time to time by Agent or the Issuing Bank. Provided
Borrower has given the notice prescribed by the first sentence of this
subsection and Borrower has executed and delivered to Agent and the Issuing Bank
the agreements, applications and other forms as required by the immediately
preceding sentence of this subsection, and subject to the terms and conditions
of this Agreement, including the satisfaction of any applicable conditions
precedent set forth in Article 5., Agent agrees to cause the Issuing Bank to
issue the requested Letter of Credit on the requested date of issuance for the
benefit of the stipulated beneficiary but in no event prior to the date five (5)
Business Days following the date after which each of Agent and the Issuing Bank
received the items required to be delivered to it under this subsection. Upon
the written request of Borrower Agent shall deliver to Borrower a copy of (i)
any Letter of Credit proposed to be issued hereunder prior to the issuance
thereof and (ii) each issued Letter of Credit within a reasonable time after the
date of issuance thereof. To the extent any term of a Letter of Credit Document
is inconsistent with a term of any Loan Document, the term of the Letter of
Credit Document shall control.
2.13.4. Reimbursement Obligations. Upon receipt by the Issuing Bank
from the beneficiary of a Letter of Credit of any demand for payment under such
Letter of Credit, Agent shall promptly notify Borrower of the amount to be paid
by the Issuing Bank as a result of such demand and the date on which payment is
to be made by the Issuing Bank to such beneficiary in respect of such demand.
Borrower hereby unconditionally and irrevocably agrees to pay and reimburse the
Issuing Bank for the amount of each demand for payment under such Letter of
Credit at or prior to the date on which payment is to be made by the Issuing
Bank to the beneficiary thereunder, without presentment, demand, protest or
other formalities of any kind. Upon receipt by the Issuing Bank of any payment
in respect of any Reimbursement Obligation, Agent agrees to cause the Issuing
Bank to pay to each Lender that has acquired a participation therein under the
second sentence of Section 2.13(f) such Lender's Pro Rata Share of such payment.
2.13.5. Manner of Reimbursement. Unless Borrower shall elect to
otherwise satisfy such Reimbursement Obligation, such reimbursement shall,
subject to satisfaction of the conditions in Section 5.1 and Section 5.2 hereof
and to the Maximum Loan Availability (after adjustment to reflect elimination of
the corresponding Reimbursement Obligation), automatically be made by the
borrowing of Revolving Loans. If Borrower fails to reimburse the Issuing Bank
for a demand for payment under a Letter of Credit by the date of such payment,
Agent shall give each Lender prompt notice thereof and of the amount of the
demand for payment, specifying such Lender's Pro Rata Share of the amount of the
related demand for payment.
2.13.6. Lenders' Participation in Letters of Credit. Immediately upon
the issuance by the Issuing Bank of any Letter of Credit each Lender shall be
deemed to have irrevocably and unconditionally purchased and received from the
Issuing Bank, without recourse or warranty, an undivided interest and
participation to the extent of such Lender's Pro Rata Share of the liability of
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the Issuing Bank with respect to such Letter of Credit and each Lender thereby
shall absolutely, unconditionally and irrevocably assume, as primary obligor and
not as surety, and shall be unconditionally obligated to the Issuing Bank to pay
and discharge when due, such Lender's Pro Rata Share of the Issuing Bank's
liability under such Letter of Credit. In addition, upon the making of each
payment by a Lender to Agent for the benefit of the Issuing Bank in respect of
any Letter of Credit pursuant to the immediately following subsection (g), such
Lender shall, automatically and without any further action on the part of the
Issuing Bank or such Lender, acquire (i) a participation in an amount equal to
such payment in the Reimbursement Obligation owing to the Issuing Bank by
Borrower in respect of such Letter of Credit and (ii) a participation in a
percentage equal to such Lender's Pro Rata Share in any interest or other
amounts payable by Borrower in respect of such Reimbursement Obligation (other
than Issuing Bank Fees).
2.13.7. Payment Obligation of Lenders. Each Lender severally agrees to
pay to Agent for the benefit of the Issuing Bank on demand in immediately
available funds in Dollars the amount of such Lender's Pro Rata Share of each
drawing paid by the Issuing Bank under each Letter of Credit to the extent such
amount is not reimbursed by Borrower pursuant to Section 2.13(d) and (e) or the
other Letter of Credit Documents. Each such Lender's obligation to make such
payments to Agent for the benefit of the Issuing Bank under this subsection, and
the Issuing Bank's right to receive the same, shall be absolute, irrevocable and
unconditional and shall not be affected in any way by any circumstance
whatsoever, including without limitation, (i) the failure of any other Lender to
make its payment under this subsection, (ii) the financial condition of
Borrower, (iii) the existence of any Default or Event of Default, including any
Event of Default described in Section 9.1(h) or (i) or (iv) the termination of
the Commitments. Each such payment to Agent for the benefit of the Issuing Bank
shall be made without any offset, abatement, withholding or deduction
whatsoever.
2.13.8. Issuing Bank's Duties Regarding Letters of Credit;
Unconditional Nature of Reimbursement Obligation. In examining documents
presented in connection with drawings under Letters of Credit and making
payments under such Letters of Credit against such documents, the Issuing Bank
shall only be required to use the same standard of care as it uses in connection
with examining documents presented in connection with drawings under letters of
credit in which it has not sold participations and making payments under such
letters of credit. Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit by, the respective beneficiaries of such Letters
of Credit. In furtherance and not in limitation of the foregoing, neither the
Issuing Bank, Agent nor any of Lenders shall be responsible (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effects of any document
submitted by any party in connection with the application for and issuance of or
any drawing honored under any Letter of Credit even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (ii) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit, or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) for failure of the
beneficiary of any Letter of Credit to comply fully with conditions required in
order to draw upon such Letter of Credit; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telex, telecopy or otherwise, whether or not they be in cipher; (v) for
errors in interpretation of technical terms; (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit, or of the proceeds thereof; (vii) for the
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misapplication by the beneficiary of any such Letter of Credit, or the proceeds
of any drawing under such Letter of Credit; and (viii) for any consequences
arising from causes beyond the control of the Issuing Bank, Agent or Lenders.
None of the above shall affect, impair or prevent the vesting of any of the
Issuing Bank's rights or powers hereunder. Any action taken or omitted to be
taken by the Issuing Bank under or in connection with any Letter of Credit, if
taken or omitted in the absence of gross negligence or willful misconduct, shall
not create against the Issuing Bank any liability to Borrower, Agent or any
Lender. In this connection, the obligation of Borrower to reimburse the Issuing
Bank for any drawing made under any Letter of Credit shall be absolute,
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement or any other applicable Letter of Credit Document under
all circumstances whatsoever, including without limitation, the following
circumstances: (i) any lack of validity or enforceability of any Letter of
Credit Document or any term or provisions therein; (ii) any amendment or waiver
of or any consent to departure from all or any of the Letter of Credit
Documents; (iii) the existence of any claim, setoff, defense or other right
which Borrower may have at any time against the Issuing Bank, Agent, any Lender,
any beneficiary of a Letter of Credit or any other Person, whether in connection
with this Agreement, the transactions contemplated hereby or in the Letter of
Credit Documents or any unrelated transaction; (iv) any breach of contract or
dispute between Borrower, the Issuing Bank, Agent, any Lender or any other
Person; (v) any demand, statement or any other document presented under a Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein or made in connection therewith being untrue or
inaccurate in any respect whatsoever; (vi) any non-application or misapplication
by the beneficiary of a Letter of Credit of the proceeds of any drawing under
such Letter of Credit; (vii) payment by the Issuing Bank under the Letter of
Credit against presentation of a draft or certificate which does not strictly
comply with the terms of the Letter of Credit; and (viii) any other act,
omission to act, delay or circumstance whatsoever that might, but for the
provisions of this Section, constitute a legal or equitable defense to or
discharge of Borrower's Reimbursement Obligations.
2.13.9. Amendments, Etc. The issuance by the Issuing Bank of any
amendment, supplement or other modification to any Letter of Credit shall be
subject to the same conditions applicable under this Agreement to the issuance
of new Letters of Credit (including, without limitation, that the request
therefor be made through the Issuing Bank), and no such amendment, supplement or
other modification shall be issued unless either (i) the respective Letter of
Credit affected thereby would have complied with such conditions had it
originally been issued hereunder in such amended, supplemented or modified form
or (ii) the Majority Lenders shall have consented thereto.
2.13.10. Information to Lenders. Promptly following the end of each
calendar month in which any Letters of Credit are outstanding, Agent shall
deliver to Borrower, and each Lender a notice describing the aggregate amount of
all Letters of Credit outstanding at the end of such month. Upon the request of
any Lender from time to time, Agent shall deliver any other information
reasonably requested by such Lender with respect to each Letter of Credit then
outstanding. Other than as set forth in this subsection, Agent shall have no
duty to notify Lenders regarding the issuance or other matters regarding Letters
of Credit issued hereunder. The failure of Agent to perform its requirements
under this subsection shall not relieve any Lender from its obligations under
Section 2.13(g).
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2.13.11. Effect of Letters of Credit on Commitments. Upon the issuance
by the Issuing Bank of any Letter of Credit and until such Letter of Credit
shall have expired or been terminated, the Commitment of each Lender shall be
deemed to be utilized for all purposes of this Agreement in an amount equal to
such Lender's Pro Rata Share of the Stated Amount of such Letter of Credit plus
any related Reimbursement Obligations then outstanding.
2.13.12. Termination of Agreement Prior to Expiration of Letters of
Credit; Letter of Credit Obligations in Excess of L/C Commitment Amount. If on
the date (the "Facility Termination Date") this Agreement is terminated (whether
voluntarily, by reason of the occurrence of an Event of Default or otherwise)
any Letters of Credit are outstanding, Borrower shall, on the Facility
Termination Date, pay to Agent an amount of money equal to the Stated Amount of
such Letter(s) of Credit, together with the amount of any fees which would
otherwise be payable by Borrower to Agent, Lenders or the Issuing Bank in
respect of such Letters of Credit but for the occurrence of the Facility
Termination Date for deposit into the Collateral Account. If at any time the
aggregate Stated Amount of all outstanding Letters of Credit shall exceed the
L/C Commitment Amount then in effect, Borrower shall pay to Agent for deposit
into the Collateral Account an amount equal to such excess. If a drawing
pursuant to any such Letter of Credit occurs on or prior to the expiration date
of such Letter of Credit, Borrower authorizes Agent to disburse to the Issuing
Bank the monies deposited in the Collateral Account to make payment to the
beneficiary with respect to such drawing. If no drawing occurs on or prior to
the expiration date of any such Letter of Credit, Agent shall return to Borrower
the monies deposited in the Collateral Account with respect to such outstanding
Letter of Credit on or before the date 10 Business Days after the expiration
date with respect to the Letter of Credit.
2.13.13. Additional Costs in Respect of Letters of Credit. If as a
result of the adoption of any Applicable Law or guideline of general
applicability regarding capital adequacy, or any change therein, 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, or if as a result of any risk-based capital guideline or
other requirement heretofore or hereafter issued by any Governmental Authority,
there shall be imposed, modified or deemed applicable any tax, reserve, special
deposit, capital adequacy or similar requirement against or with respect to or
measured by reference to Letters of Credit and the result shall be to increase
the cost to the Issuing Bank of issuing (or any Lender purchasing participations
in) or maintaining its obligation hereunder to issue (or purchase participations
in) any Letter of Credit or reduce any amount receivable by the Issuing Bank or
any Lender hereunder in respect of any Letter of Credit, then, upon demand by
the Issuing Bank or such Lender, Borrower shall pay immediately to the Issuing
Bank or such Lender, as applicable, from time to time as specified by the
Issuing Bank or a Lender, such additional amounts as shall be sufficient to
compensate the Issuing Bank or such Lender for such increased costs or
reductions in amount.
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ARTICLE 3.
GENERAL LOAN PROVISIONS
SECTION 3.1. Fees.
3.1.1. On the Effective Date and on the 1st day of February, May and
August, 1999, Borrower shall pay to the Agent for the account of the Lenders an
amount equal to one-sixteenth of one percent (0.0625%) of the aggregate amount
of all Lenders' Commitments.
3.1.2. If, pursuant to Section 2.11, Borrower requests an extension of
the Revolving Credit Termination Date, Borrower shall pay to Agent for the
account of Lenders an extension fee (the "Extension Fee") equal to one-eighth of
one percent (0.125%) of the aggregate amount of the Commitments at such time.
Such fee shall be payable on the date on which Borrower delivers its Extension
Request.
3.1.3. Borrower agrees to pay to Agent such reasonable fees for
services rendered by Agent as shall be separately agreed upon between Borrower
and Agent. Borrower agrees to pay to the Issuing Bank such reasonable fees for
services rendered by the Issuing Bank as shall be separately agreed upon between
Borrower and the Issuing Bank from time to time.
3.1.4. Borrower agrees to pay to Agent for account of each Lender a
letter of credit fee at a rate per annum equal to one and one-half percent
(1.5%) of the Stated Amount of each Letter of Credit on the date of issuance of
such Letter of Credit and on each anniversary of the date of issuance thereof
until such Letter of Credit has expired. The fee provided for in the immediately
preceding sentence shall be nonrefundable. Borrower shall pay directly to the
Issuing Bank from time to time on demand all commissions, charges, costs and
expenses in the amounts customarily charged by the Issuing Bank from time to
time in like circumstances with respect to the issuance of each Letter of
Credit, drawings, amendments and other transactions relating thereto.
SECTION 3.2. Computation of Interest and Fees.
Interest on the Loans and the Letter of Credit Liabilities and all fees
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 of a
period).
SECTION 3.3. Pro Rata Treatment.
Except to the extent otherwise provided herein: (a) each borrowing from
Lenders under Section 2.1 shall be made from Lenders, each payment of the Fees
under Sections 3.1(a) and (b) shall be made for account of Lenders, and each
termination or reduction of the amount of the Commitments under Section 2.10.
shall be applied to the respective Commitments of Lenders, pro rata according to
the amounts of their respective Commitments; (b) each payment or prepayment of
principal of Loans shall be made for account of Lenders pro rata in accordance
with the respective unpaid principal amounts of the Loans held by them, provided
that if immediately prior to giving effect to any such payment in respect of any
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Revolving Loans the outstanding principal amount of the Revolving Loans shall
not be held by Lenders pro rata in accordance with their respective Commitments
in effect at the time such Loans were made, then such payment shall be applied
to the Revolving Loans in such manner as shall result, as nearly as is
practicable, in the outstanding principal amount of the Revolving Loans being
held by Lenders pro rata in accordance with their respective Commitments; (c)
each payment of interest on Loans shall be made for account of Lenders pro rata
in accordance with the amounts of interest on such Loans then due and payable to
the respective Lenders; (d) the making, Conversion and Continuation of Revolving
Loans of a particular Type (other than Conversions provided for by Section
2.7(c) shall be made pro rata among Lenders according to the amounts of their
respective Commitments (in the case of making of Loans) or their respective
Loans (in the case of Conversions and Continuations of Loans) and the then
current Interest Period for each Lender's portion of each Loan of such Type
shall be coterminous; and (e) the Lenders' participation in, and payment
obligations in respect of, Letters of Credit under Section 2.13, shall be pro
rata in accordance with their respective Commitments. The fees referred to in
Section 3.1(c) shall be for the account of only Agent.
SECTION 3.4. Sharing of Payments, Etc.
Borrower agrees that, in addition to (and without limitation of) any
right of set-off, bankers' lien or counterclaim a Lender may otherwise have,
each Lender shall be entitled, at its option but subject to receipt of Agent's
prior written consent, to offset balances held by it for the account of Borrower
at any of such Lender's offices, in Dollars or in any other currency, against
any principal of, or interest on, any of such Lender's Loans hereunder (or other
Obligations owing to such Lender hereunder) which is not paid when due
(regardless of whether such balances are then due to Borrower), in which case
such Lender shall promptly notify Borrower, all other Lenders and Agent thereof;
provided, however, such Lender's failure to give such notice shall not affect
the validity of such offset. If a Lender shall obtain payment of any principal
of, or interest on, any Loan under this Agreement, or shall obtain payment on
any other Obligation owing by Borrower through the exercise of any right of
set-off, banker's lien or counterclaim or similar right or otherwise or through
voluntary prepayments directly to a Lender or other payments made by Borrower to
a Lender not in accordance with the terms of this Agreement and such payment,
pursuant to the immediately preceding Section, should be distributed to Lenders
in accordance with their Pro Rata Shares, such Lender shall promptly purchase
from the other Lenders participations in (or, if and to the extent specified by
such Lender, direct interests in) the Loans made by the other Lenders or other
Obligations owed to such other Lenders in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all Lenders
shall share the benefit of such payment (net of any expenses which may be
incurred by such Lender in obtaining or preserving such benefit) in accordance
with their respective Pro Rata Shares. To such end, all Lenders shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored.
Borrower agrees that any Lender so purchasing a participation (or direct
interest) in the Loans or other Obligations owed to such other Lenders may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender were a direct
holder of Loans in the amount of such participation. Nothing contained herein
shall require any Lender to exercise any such right or shall affect the right of
any Lender to exercise, and retain the benefits of exercising, any such right
with respect to any other indebtedness or obligation of Borrower.
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SECTION 3.5. Defaulting Lenders.
If for any reason any Lender (a "Defaulting Lender") shall fail or
refuse to perform its obligations under this Agreement or any other Loan
Document to which it is a party within the time period specified for performance
of such obligation or, if no time period is specified, if such failure or
refusal continues for a period of five Business Days after notice from Agent,
then, in addition to the rights and remedies that may be available to Agent or
Borrower under this Agreement or Applicable Law, such Defaulting Lender's right
to participate in the administration of the Loans, this Agreement and the other
Loan Documents, including without limitation, any right to vote in respect of,
to consent to or to direct any action or inaction of Agent or to be taken into
account in the calculation of Majority Lenders or all Lenders, shall be
suspended during the pendency of such failure or refusal. If for any reason a
Lender fails to make timely payment to Agent of any amount required to be paid
to Agent hereunder (without giving effect to any notice or cure periods), in
addition to other rights and remedies which Agent or Borrower may have under the
immediately preceding provisions or otherwise, Agent shall be entitled (i) to
collect interest from such Defaulting Lender on such delinquent payment for the
period from the date on which the payment was due until the date on which the
payment is made at the Federal Funds Rate, (ii) to withhold or setoff and to
apply in satisfaction of the defaulted payment and any related interest, any
amounts otherwise payable to such Lender under this Agreement or any other Loan
Document and (iii) to bring an action or suit against such Lender in a court of
competent jurisdiction to recover the defaulted amount and any related interest.
Any amounts received by Agent in respect of a Defaulting Lender's Pro Rata Share
of the Loans shall not be paid to such Defaulting Lender and shall be held by
Agent and applied against the purchase price of such Pro Rata Share of the Loans
under Section 3.6 or (b) paid to such Defaulting Lender upon the Defaulting
Lender's curing of its default.
SECTION 3.6. Purchase of Defaulting Lender's Pro Rata Share.
3.6.1. Any Lender who is not a Defaulting Lender shall have the right,
but not the obligation, in its sole discretion, to acquire all of a Defaulting
Lender's Pro Rata Share of the Loans. If more than one Lender exercises such
right, each such Lender shall have the right to acquire such proportion of such
Defaulting Lender's Pro Rata Share of the Loans as they may mutually agree. Upon
any such purchase of the Pro Rata Share of the Loans of a Defaulting Lender, the
Defaulting Lender's interest in the Loans and its rights hereunder (but not its
liability in respect thereof or under the Loan Documents or this Agreement to
the extent the same relate to the period prior to the effective date of the
purchase) shall terminate on the date of purchase, and the Defaulting Lender
shall promptly execute all documents reasonably requested to surrender and
transfer such interest to the purchaser thereof, including an appropriate
Assignment and Acceptance Agreement.
3.6.2. The purchase price for the Pro Rata Share of the Loans of a
Defaulting Lender shall be equal to the amount of the principal balance of the
Loans outstanding and owed by Borrower to the Defaulting Lender. Prior to
payment of such purchase price to Defaulting Lender, Agent shall apply against
such purchase price any amounts payable in respect of such Pro Rata Share of the
Loans as contemplated by the last sentence of Section 3.5. The Defaulting Lender
shall be entitled to receive amounts owed to it by Borrower under the Loan
Documents which accrued prior to the date of the default by the Defaulting
Lender, to the extent the same are received by Agent from or on behalf of
Borrower. There shall be no recourse against any Lender or Agent for the payment
of such sums except to the extent of the receipt of payments from any other
party or in respect of the Loans.
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SECTION 3.7. Limitation of Interest.
3.7.1. It is expressly stipulated and agreed to be the intent of
Borrower and Lenders at all times to comply strictly with the applicable Texas
law governing the maximum rate or amount of interest payable on the Notes or the
Related Indebtedness (or applicable United States federal law to the extent that
it permits Lenders to contract for, charge, take, reserve or receive a greater
amount of interest than under Texas law). If the applicable law is ever
judicially interpreted so as to render usurious any amount (i) contracted for,
charged, taken, reserved or received pursuant to the Notes, any of the other
Loan Documents or any other communication or writing by or between Borrower and
Lenders related to the transaction or transactions that are the subject matter
of the Loan Documents, (ii) contracted for, charged or received by reason of
Lenders' exercise of the option to accelerate the maturity of the Notes and/or
the Related Indebtedness, or (iii) Borrower will have paid or Lenders will have
received by reason of any voluntary prepayment by Borrower of the Notes and/or
the Related Indebtedness, then it is Borrower's and Lenders' express intent that
all amounts charged in excess of the Maximum Lawful Rate shall be automatically
cancelled, ab initio, and all amounts in excess of the Maximum Lawful Rate
theretofore collected by Lenders shall be credited on the principal balance of
the Notes and/or the Related Indebtedness (or, if the Notes and all Related
Indebtedness have been or would thereby be paid in full, refunded to Borrower),
and the provisions of the Notes and the other Loan Documents immediately be
deemed reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder and thereunder; provided, however, if the
Notes have been paid in full before the end of the stated term of the Notes,
then Borrower and Lenders agree that Lenders shall, with reasonable promptness
after Lenders discover or are advised by Borrower that interest was received in
an amount in excess of the Maximum Lawful Rate, either refund such excess
interest to Borrower and/or credit such excess interest against the Notes and/or
any Related Indebtedness then owing by Borrower to Lenders. Borrower hereby
agrees that as a condition precedent to any claim seeking usury penalties
against Lenders, Borrower will provide written notice to Lenders, advising
Lenders in reasonable detail of the nature and amount of the violation, and
Lenders shall have sixty (60) days after receipt of such notice in which to
correct such usury violation, if any, by either refunding such excess interest
to Borrower or crediting such excess interest against the Notes and/or the
Related Indebtedness then owing by Borrower to Lenders. All sums contracted for,
charged or received by Lender for the use, forbearance or detention of any debt
evidenced by the Notes and/or the Related Indebtedness shall, to the extent
permitted by applicable law, be amortized or spread, using the actuarial method,
throughout the stated term of the Notes and/or the Related Indebtedness
(including any and all renewal and extension periods) until payment in full so
that the rate or amount of interest on account of the Notes and/or the Related
Indebtedness does not exceed the Maximum Lawful Rate from time to time in effect
and applicable to the Notes and/or the Related Indebtedness for so long as debt
is outstanding. In no event shall the provisions of Chapter 346 of the Texas
Finance Code (which regulates certain revolving credit loan accounts and
revolving triparty accounts) apply to the Notes and/or the Related Indebtedness.
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Notwithstanding anything to the contrary contained herein or in any of the other
Loan Documents, it is not the intention of Lenders to accelerate the maturity of
any interest that has not accrued at the time of such acceleration or to collect
unearned interest at the time of such acceleration. Borrower and Lenders hereby
agree that any and all suits alleging the contracting for, charging or receiving
of usurious interest shall lie in Harris County, Texas, and each irrevocably
waive the right to venue in any other county.
3.7.2. As used herein, the term "Maximum Lawful Rate" shall mean the
maximum lawful rate of interest which may be contracted for, charged, taken,
received or reserved by Lenders in accordance with the applicable laws of the
State of Texas (or applicable United States federal law to the extent that it
permits Lender to contract for, charge, take, receive or reserve a greater
amount of interest than under Texas law), taking into account all Charges (as
herein defined) made in connection with the transaction evidenced by the Notes
and the other Loan Documents. As used herein, the term "Charges" shall mean all
fees, charges and/or any other things of value, if any, contracted for, charged,
received, taken or reserved by Lenders in connection with the transactions
relating to the Notes and the other Loan Documents, which are treated as
interest under applicable law. As used herein, the term "Related Indebtedness"
shall mean any and all debt paid or payable by Borrower to Lenders pursuant to
the Loan Documents or any other communication or writing by or between Borrower
and Lenders related to the transaction or transactions that are the subject
matter of the Loan Documents, except such debt which has been paid or is payable
by Borrower to Lender under the Notes.
3.7.3. To the extent that Lender is relying on Chapter 1D of the Texas
Credit Title to determine the Maximum Lawful Rate payable on the Notes and/or
the Related Indebtedness, Lender will utilize the weekly ceiling from time to
time in effect as provided in such Chapter 1D, as amended. To the extent United
States federal law permits Lenders to contract for, charge, take, receive or
reserve a greater amount of interest than under Texas law, Lenders will rely on
United States federal law instead of such Chapter 1D for the purpose of
determining the Maximum Lawful Rate. Additionally, to the extent permitted by
applicable law now or hereafter in effect, Lenders may, at their option and from
time to time, utilize any other method of establishing the Maximum Lawful Rate
under such Chapter 1D or under other applicable law by giving notice, if
required, to Borrower as provided by applicable law now or hereafter in effect.
3.7.4. Notwithstanding anything in the Notes to the contrary, if at any
time (i) interest rate provided for under the Notes or any other Loan Document
(the "Stated Rate"), and (ii) the Charges computed over the full term of the
Notes, exceed the Maximum Lawful Rate, then the rate of interest payable
hereunder, together with all Charges, shall be limited to the Maximum Lawful
Rate; provided, however, that any subsequent reduction in the Stated Rate shall
not cause a reduction of the rate of interest payable hereunder below the
Maximum Lawful Rate until the total amount of interest earned hereunder,
together with all Charges, equals the total amount of interest which would have
accrued at the Stated Rate if such interest rate had at all times been in
effect. Changes in the Stated Rate resulting from a fluctuations in the rates
used to calculate the Stated Rate shall be subject to the provisions of this
paragraph.
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SECTION 3.8. Statements of Account.
Agent will account to Borrower monthly with a statement of Loans,
Letters of Credit, charges and payments made pursuant to this Agreement and the
other Loan Documents, and such account rendered by Agent shall be prima facie
evidence thereof. The failure of Agent or any Lender to maintain or deliver such
a statement of accounts shall not relieve or discharge Borrower from its
obligations hereunder.
SECTION 3.9. Agent's Reliance.
Neither Agent, nor the Issuing Bank, nor any Lender shall incur any
liability to Borrower for acting upon any telephonic notice permitted under this
Agreement which Agent, the Issuing Bank or such Lender believes reasonably and
in good faith to have been given by an individual authorized to deliver a Notice
of Borrowing, Notice of Conversion, Notice of Continuation, a request for
issuance of a Letter of Credit or an Extension Request on behalf of Borrower.
ARTICLE 4.
UNENCUMBERED POOL PROPERTIES
SECTION 4.1. Acceptance of Unencumbered Pool Properties
4.1.1. Existing Unencumbered Pool Properties. Subject to compliance
with the terms and conditions of Section 5.1, Lenders have accepted the
properties listed on Schedule 4.1 as of the date hereof as Unencumbered Pool
Properties.
4.1.2. Submission of Additional Properties. If Borrower desires that
Lenders accept an additional Property as an Unencumbered Pool Property, Borrower
shall so notify Agent in writing and the Agent shall promptly notify each
Lender. No Property will be evaluated by Lenders unless it is an Eligible
Property, and unless and until Borrower delivers to Agent the following, in form
and substance satisfactory to Agent:
4.1.2.1. An Executive Investment Summary in a form acceptable
to the Agent;
4.1.2.2. An Unencumbered Pool Certificate setting forth (A) on
a pro forma basis the Maximum Loan Availability, assuming that such
Property is accepted as an Unencumbered Pool Property; (B) the
Occupancy Rate and Economic Occupancy Rate of such Property, (C) the
aggregate Occupancy Rate and Economic Occupancy Rate of all
Unencumbered Pool Properties, assuming that such Property is accepted
as an Unencumbered Pool Property, and (D) the amount of the
Unencumbered Pool Value, assuming that such Property is accepted as an
Unencumbered Pool Property, attributable to all Unencumbered Pool
Properties which are owned by Subsidiaries that are not Wholly Owned
Subsidiaries; and
4.1.2.3. An Eligibility Certificate executed by the chief
financial officer or controller of Borrower (which officer shall be
authorized to execute such certificate) in the form of Exhibit J
attached hereto.
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Following receipt of the foregoing items (i) through (iii) for such Property,
Agent will promptly submit such documents and information to Lenders for review
and approval by all Lenders of such Property as an Unencumbered Pool Property.
Each Lender shall have 20 days from the day on which the Agent receives such
documents and information from Borrower (the "Review Period") to take one of the
following actions: (I) notify the Agent of such Lender's approval of the
Property as an Unencumbered Pool Property or (II) request from the Agent further
information relating to such Property in accordance with the following
paragraph. If none of the foregoing actions is taken by any Lender prior to the
expiration of the Review Period, such Lender shall be deemed to have accepted
such Property as an Unencumbered Pool Property.
At any time during the Review Period, any Lender may request that the
Agent obtain one or more of the items described in subsection (c) below from
Borrower for such Lender's review in connection with the information set forth
in the Eligibility Certificate. Any such request by a Lender must be in writing.
If a request is made for such further information by a Lender during the Review
Period, Borrower shall promptly (but in any event within 10 days of receipt of
such request) deliver the requested information to the Agent who shall promptly
deliver it to the requesting Lender. Such requesting Lender shall then have 20
days (the "Extended Review Period") after the Agent's receipt from Borrower of
the requested information to notify the Agent of its acceptance or rejection of
such Property. If such requesting Lender notifies the Agent of its rejection of
such Property, such Property shall not be accepted as an Unencumbered Pool
Property under this subsection (b). If such requesting Lender fails to notify
Agent prior to the expiration of the Extended Review Period, such requesting
Lender shall be deemed to have accepted such Property as Unencumbered Pool
Property.
4.1.3. Alternative Acceptance Procedure. At the Borrower's option or
if a Property fails to be accepted as an Unencumbered Pool Property pursuant to
the immediately preceding subsection (b), Borrower may resubmit such Property
for consideration by notifying Agent in writing of Borrower's intent to resubmit
such Property and by delivering the following additional items, in form and
substance satisfactory to Agent.
4.1.3.1. A description of such Property, such description to
include the age, location, site plan and current occupancy rate of such
Property;
4.1.3.2. Operating statements for such Property for the
immediately preceding fiscal year and for current fiscal year through
the fiscal quarter most recently ending, in each case audited or
certified by a representative of Borrower as being true and correct in
all material respects and prepared in accordance with GAAP, provided
that, with respect to any period such Property was not owned by a Loan
Party, such information shall only be required to be delivered to the
extent reasonably available to Borrower and such certification may be
based upon the best of Borrower's knowledge;
4.1.3.3. If prepared by Borrower, a pro forma operating
statement for such Property;
4.1.3.4. A "Phase I" environmental assessment of such Property
not more than 12 months old, which report (1) has been prepared by an
environmental engineering firm acceptable to Agent and (2) complies
with the requirements contained in Agent's guidelines entitled
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"Environmental Site Assessment - Scope of Work" dated December 29,
1994, including any amendments, supplements or other modifications to
such guidelines adopted from time to time by Agent to be used in its
lending practice generally, or any other similar guidelines adopted by
Agent in replacement of such guidelines, to be used in its lending
practice generally and any additional environmental studies or
assessments available to the Borrower performed with respect to such
Property;
4.1.3.5. Copies of all leases at such Property, together with
sales information setting forth the total sales per square foot of
leased space for the tenants under any Major Space Leases at such
Property for the prior three year period (to the extent available to
Borrower);
4.1.3.6. An occupancy report and rent roll for such Property
for the most recent fiscal quarter, certified by a representative of
Borrower as being true and correct in all material respects;
4.1.3.7. An operating budget for such Property with respect to
the current fiscal year;
4.1.3.8. If requested by Agent, copies of all engineering,
mechanical, structural and maintenance studies performed with respect
to such Property;
4.1.3.9. With respect to any Property being acquired by a Loan
Party, a copy of the materials relating to such Property submitted by
Borrower to its board of trustees or investment committee (including
any Executive Investment Summaries) for their approval of such Property
(to the extent such materials have not already been provided under any
of the preceding subsections); and
4.1.3.10. Such other information Agent may reasonably request
in order to evaluate the Property.
Following receipt of the foregoing documents and information, Agent
shall promptly submit such documents and information to Lenders, for approval by
Lenders and Agent. Upon such approval by the Majority Lenders and Agent, and
upon delivery of all of the following to Agent, such Property shall become an
Unencumbered Pool Property:
4.1.3.10.1. A copy of the most recent ALTA
Owner's Policy of Title Insurance (or commitment to issue such
a policy to the Loan Party owning or to own such Property)
relating to such Property showing the identity of the fee
titleholder thereto and all matters of record and
4.1.3.10.2. If such Property is owned by, or is
to be acquired by a Subsidiary which is not already a
Guarantor, all items required to be delivered by a Subsidiary
under Section 7.16; and
4.1.3.10.3. Such other items or documents as may
be appropriate under the circumstances as requested by Agent.
SECTION 4.2 Termination of Designation as Unencumbered Pool Property.
From time to time Borrower may request, upon not less than 30 days
prior written notice to Agent and Lenders, that an Unencumbered Pool Property
cease to be an Unencumbered Pool Property. Agent shall grant such request if all
of the following conditions are satisfied:
4.2.1. no Default or Event of Default shall have occurred and be
continuing both at the time of such request and immediately after giving effect
to such request; and
4.2.2. Borrower shall have delivered to Agent an Unencumbered Pool
Certificate demonstrating on a pro forma basis, and Agent shall have determined,
that the outstanding principal balance of the Loans will not exceed the Maximum
Loan Availability after giving effect to such request and any prepayment to be
made and/or the acceptance of any Property as an additional or replacement
Unencumbered Pool Property to be given concurrently with such request.
SECTION 4.3. Additional Requirements of Unencumbered Pool Properties.
4.3.1. The aggregate Occupancy Rate of all Unencumbered Pool
Properties, when determined on a combined basis, shall at all times equal or
exceed 80% and the weighted average Economic Occupancy Rate of all Unencumbered
Pool Properties, when determined on a combined basis giving proportionate value
based on annual rent rolls, shall at all times equal or exceed 95%.
4.3.2. A Property shall cease to be an Unencumbered Pool Property if it
shall cease to be an Eligible Property.
4.3.3. A Property shall cease to be an Unencumbered Pool Property if
the tenant, while paying rent, has not actually occupied the Property for 180
days.
4.3.4. A Property shall cease to be an Unencumbered Property if the
tenant ceases to pay rent unless a replacement tenant acceptable to Lenders is
identified within 90 days of such failure to pay rent.
ARTICLE 5.
CONDITIONS
SECTION 5.1. Conditions Precedent to Effectiveness.
The effectiveness of this Agreement and the obligation of Lenders to
make any Loans to Borrower and Agent to cause the Issuing Bank to issue any
Letters of Credit in accordance with the terms hereof are subject to the
condition precedent that Borrower deliver to Agent each of the following, each
of which shall be in form and substance satisfactory to Agent:
5.1.1. counterparts of this Agreement and all other Loan Documents
executed by the parties hereto;
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5.1.2. Revolving Notes executed by Borrower, payable to each Lender
and complying with the terms of Section 2.12;
5.1.3. the Guaranty executed by each Guarantor;
5.1.4. an opinion of counsel to the Loan Parties, and addressed to
Agent and Lenders in substantially the form of Exhibit H;
5.1.5. a certified copy of the Bylaws of Borrower;
5.1.6. a certificate of incumbency signed by the Secretary or Assistant
Secretary of Borrower with respect to each of the officers of Borrower
authorized to execute and deliver the Loan Documents to which Borrower is a
party;
5.1.7. certified copies (certified by the Secretary or Assistant
Secretary of Borrower) of all action taken by Borrower's Board of Directors to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party;
5.1.8. the articles of incorporation, articles of organization,
certificate of limited partnership or other comparable organizational instrument
(if any) of each Guarantor certified as of a recent date by the Secretary of
State of the State of formation of such Guarantor;
5.1.9. a Certificate of Good Standing or certificate of similar meaning
with respect to Borrower and each Guarantor issued as of a recent date by the
Secretary of State of the State of formation of Borrower and each such Guarantor
and certificates of qualification to transact business or other comparable
certificates issued by each Secretary of State (and any state department of
taxation, as applicable) of each state in which Borrower and each such Guarantor
is required to be so qualified;
5.1.10. a certificate of incumbency signed by the Secretary or
Assistant Secretary (or other individual performing similar functions) of each
Guarantor with respect to each of the officers of such Guarantor authorized to
execute and deliver the Loan Documents to which such Guarantor is a party;
5.1.11. copies certified by the Secretary or Assistant Secretary of
each Guarantor (or other individual performing similar functions) of (i) the
by-laws of such Guarantor, if a corporation, the operating agreement, if a
limited liability company, the partnership agreement, if a limited or general
partnership, or other comparable document in the case of any other form of legal
entity and (ii) all corporate, partnership, member or other necessary action
taken by such Guarantor to authorize the execution, delivery and performance of
the Loan Documents to which it is a party;
5.1.12. an Unencumbered Pool Certificate calculated as of the date
hereof;
5.1.13. the fees then due under Section 3.1;
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5.1.14. such other documents and instruments as Agent or any Lender
may reasonably request.
SECTION 5.2. Conditions Precedent to Loans and Issuance of Letters of
Credit.
The obligation of Lenders to make any Revolving Loans and of Agent to
cause the Issuing Bank to issue Letters of Credit is subject to the condition
precedent that the following conditions be satisfied in the judgment of Agent:
5.2.1. in the case of Revolving Loans, timely receipt by Agent of a
Notice of Borrowing;
5.2.2. the proposed use of proceeds of such Revolving Loans or proposed
use of such Letter of Credit, as the case may be, set forth in the Notice of
Borrowing is consistent with the provisions of Section 7.8.
5.2.3. Since the date of the most recent financial statements of
Borrower or Guarantors delivered to Agent, nothing shall have occurred which
would or could have a Material Adverse Effect on Borrower or any Guarantor.
5.2.4. the proposed use of proceeds of such Revolving Loans or the
proposed use of such Letter of Credit, as the case may be, set forth in the
Notice of Borrowing is consistent with the provisions of Section 7.8;
5.2.5. immediately before and after the making of such Revolving Loans
or the issuance of such Letter of Credit, as applicable, no Default (including
without limitation the existence of the condition described in Section 2.1(b))
or Event of Default shall have occurred and be continuing; and
5.2.6. the representations and warranties of Borrower and the other
Loan Parties contained in this Agreement and the other Loan Documents to which
any of them is a party shall be true in all material respects on and as of the
date of the making of such Revolving Loans or issuance of such Letter of Credit,
as applicable, except to the extent such representations or warranties
specifically relate to an earlier date or such representations or warranties
become untrue by reason of events or conditions otherwise permitted hereunder
and the other Loan Documents.
The delivery of each Notice of Borrowing, the making of each Loan and the
issuance of each Letter of Credit shall constitute a certification by Borrower
to Agent, the Issuing Bank and Lenders that the statements in the immediately
preceding clauses (d) through (f) are true.
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ARTICLE 6.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Agent, the Issuing Bank and each
Lender as follows:
SECTION 6.1. Existence and Power.
Borrower is a corporation duly formed, validly existing and in good
standing under the laws of the State of Maryland and is qualified as a real
estate investment trust under Section 856 of the Internal Revenue Code. Each of
Borrower's Subsidiaries is a corporation or other applicable legal entity, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation. Each of Borrower and its
Subsidiaries has all requisite power and authority and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted and is duly qualified and is in good standing as a
foreign corporation or other applicable legal entity, and authorized to do
business, in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification or authorization except where
the failure to be so qualified or authorized would not have a Materially Adverse
Effect.
SECTION 6.2. Ownership Structure.
Schedule 6.2. correctly sets forth the corporate structure and
ownership interests of Borrower and all of its Subsidiaries as of the date
hereof, including the correct legal name of Borrower and each such Subsidiary,
and Borrower's relative equity interest in each such Subsidiary.
SECTION 6.3. Authorization of Agreement, Notes, Loan Documents and
Borrowings.
Each Loan Party has the right and power, and has taken all necessary
action to authorize it, to borrow hereunder (in the case of Borrower) and to
execute, deliver and perform the Loan Documents to which it is or is to be a
party, in accordance with their respective terms and to consummate the
transactions contemplated. Each of the Loan Documents has been (and when
executed and delivered in connection with this Agreement will be) duly executed
and delivered by the duly authorized officers of each Loan Party a party thereto
and each is (and each other Loan Document when executed and delivered in
connection with this Agreement will be) a legal, valid and binding obligation of
such Loan Party enforceable against such Loan Party in accordance with its
respective terms, except as the same may be limited by bankruptcy, insolvency,
and other similar laws affecting the rights of creditors generally and the
availability of equitable remedies for the enforcement of certain obligations
(other than the payment of principal) contained herein or therein may be limited
by equitable principles generally.
SECTION 6.4. Compliance of Agreement, Notes, Loan Documents and
Borrowing with Laws, etc. The execution, delivery and performance of the Loan
Documents in accordance with their respective terms and the borrowing of Loans
hereunder do not and will not, by the passage of time, the giving of notice or
otherwise (a) require any Governmental Approval, or violate any Applicable Law
relating to any Loan Party, the failure to possess or to comply with which would
have a Materially Adverse Effect; (b) conflict with, result in a breach of or
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constitute a default under the declaration of trust of Borrower, the articles of
incorporation, articles of organization, partnership agreement or other
comparable instrument of any other Loan Party, or any indenture, agreement or
other instrument to which any Loan Party is a party or by which it or any of its
properties may be bound and the violation of which would have a Materially
Adverse Effect; or (c) result in or require the creation or imposition of any
Lien upon or with respect to any Unencumbered Pool Property other than Permitted
Liens.
SECTION 6.5. Compliance with Law; Governmental Approvals.
Each of Borrower and its Subsidiaries is in compliance with each
Governmental Approval applicable to it and in compliance with all other
Applicable Law relating to it, except for noncompliances which, and Governmental
Approvals the failure to possess which, would not, singly or in the aggregate,
cause a Default or Event of Default or have a Materially Adverse Effect and in
respect of which (if Borrower has actual knowledge of such Applicable Law or
Governmental Approval) adequate reserves have been established on the books of
Borrower or such Subsidiary, as applicable.
SECTION 6.6. Indebtedness and Guarantees.
Schedule 6.6. is a complete and correct listing of all Indebtedness and
Guarantees of Borrower and the other Loan Parties as of the date hereof. Each
Loan Party has performed and is in compliance with all of the terms of such
Indebtedness and such Guarantees and all instruments and agreements relating
thereto in all material respects, and no default or event of default, or event
or condition which with the giving of notice, the lapse of time or otherwise,
would constitute such a default or event of default, exists with respect to any
such Indebtedness or Guarantees.
SECTION 6.7. Property Management Agreements and Other Major
Agreements.
Schedule 6.7 sets forth all Property Management Agreements and other
Major Agreements to which Borrower is a party or otherwise relating to any of
the Unencumbered Pool Properties as of the date hereof. All Property Management
Agreements and other Major Agreements are in full force and effect and to
Borrower's knowledge no default or event of default exists under any of such
agreements.
SECTION 6.8. Absence of Defaults.
Neither Borrower nor any Guarantor is in default under its declaration
of trust, articles of incorporation, bylaws, operating agreement, partnership
agreement or other organizational or constituent document, and no event has
occurred, which has not been remedied, cured or waived (a) which constitutes a
Default or an Event of Default; or (b) which constitutes, or which with the
passage of time, the giving of notice or otherwise, would constitute, a default
or event of default by Borrower, any Guarantor or any other Loan Party under any
material agreement (other than this Agreement) or judgment, decree or order to
which Borrower, any Guarantor or any other Loan Party is a party or by which
Borrower or any of its properties may be bound.
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SECTION 6.9. Financial Information.
The consolidated balance sheets of Borrower as at December 31, 1997,
March 31, 1998 and June 30, 1998 and the related statements of earnings,
stockholders' equity and cash flows for the twelve month period and three month
period, respectively, then ending, copies of which have been delivered to Agent
and Lenders, fairly present, in conformity with GAAP, the financial position of
Borrower and its Consolidated Subsidiaries as of such date and its results of
operations and cash flows for such fiscal period. Since June 30, 1998, and with
reference to such date, there has been no material adverse change in the
business, properties, financial position, or results of operations of Borrower
and its Subsidiaries taken as a whole.
SECTION 6.10. Litigation.
There is no action, suit or proceeding pending against, or to the
knowledge of Borrower threatened against or affecting, Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official (a) which would reasonably be expected to have a Materially Adverse
Effect or (b) which in any manner draws into question the validity of any Loan
Document.
SECTION 6.11. ERISA.
No Loan Party maintains, and has at any time maintained, any Plan
subject to the provisions of ERISA and is, and has at any time been, a member of
any ERISA Group with any Person that has at any time maintained any such Plan.
SECTION 6.12. Taxes.
6.12.1. As of the date hereof, no United States Federal income tax
returns of the "affiliated group" (as defined in the Internal Revenue Code) of
which Borrower is a member have been examined and closed. The members of such
affiliated group have filed all United States Federal income tax returns and all
other material tax returns which are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment received by
any of them except for taxes being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established. The
charges, accruals and reserves on the books of Borrower in respect of taxes or
other governmental charges are, in the opinion of Borrower, adequate.
6.12.2. Borrower is in compliance with all conditions imposed under the
Internal Revenue Code to allow Borrower to maintain its status as a REIT.
SECTION 6.13. Investment Company Act; Public Utility Holding
Company Act.
Neither Borrower nor any of its Subsidiaries is (a) an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, (b) a "holding company" or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
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of the Public Utility Holding Company Act of 1935, as amended, or (c) subject to
any other Applicable Law which purports to regulate or restrict its ability to
borrow money or to consummate the transactions contemplated by this Agreement or
the other Loan Documents or to perform its obligations hereunder or thereunder.
SECTION 6.14. Full Disclosure.
All written information furnished by or on behalf of Borrower to Agent,
Issuing Bank and Lenders for purposes of or in connection with this Agreement
and the other Loan Documents or any transaction contemplated hereby is, and all
such information hereafter furnished by or on behalf of Borrower or any
Subsidiary to Agent, Issuing Bank and Lenders will be, true and accurate in all
material respects on the date as of which such information is stated or
certified and does not, and will not, fail to state any material facts necessary
to make the statements contained therein not misleading. Borrower has disclosed
to Agent in writing any and all facts known to Borrower which materially and
adversely affect or may affect (to the extent Borrower can now reasonably
foresee), the business, operations or financial condition of Borrower and of its
Subsidiaries taken as a whole, or the ability of Borrower to perform its
obligations under any of the Loan Documents.
SECTION 6.15. Insurance.
Schedule 6.15. sets forth a true and correct description of the
insurance coverage maintained by or on behalf of each Loan Party currently in
effect.
SECTION 6.16. Not Plan Assets.
The respective assets of Borrower and each other Loan Party do not and
will not constitute "plan assets" within the meaning of ERISA, the Internal
Revenue Code and the respective regulations promulgated thereunder, of any ERISA
Plan or Non-ERISA Plan. The execution, delivery and performance of this
Agreement, and the borrowing and repayment of amounts thereunder, do not and
will not constitute "prohibited transactions" under ERISA or the Internal
Revenue Code.
SECTION 6.17. Title and Liens.
Each of Borrower and its Subsidiaries has good, marketable and legal
title to, or a valid leasehold interest in, (a) its respective Properties and
(b) its other assets, except in the case of this clause (b) where the failure to
have such title to its other assets could not reasonably be expected to have a
Materially Adverse Effect. Each of the Unencumbered Pool Properties is free and
clear of all Liens except for Permitted Liens.
SECTION 6.18. Unencumbered Pool Properties.
Each of the Unencumbered Pool Properties qualifies as an Eligible
Property.
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SECTION 6.19. Margin Stock.
Neither Borrower nor any of its Subsidiaries is engaged principally in
the business of extending credit for the purpose of purchasing or carrying
"margin stock" within the meaning of Regulation T, U or X.
SECTION 6.20. Solvency.
Borrower and the other Loan Parties are Solvent and will remain Solvent
after giving effect to the execution and delivery of each Loan Document to which
any is a party, the initial disbursement of Loans hereunder and the payment and
accrual of all fees then payable under this Agreement or any of the other Loan
Documents.
ARTICLE 7.
COVENANTS
Borrower agrees that, so long as Lenders have any Commitments hereunder
or any Obligation remains unpaid:
SECTION 7.1. Information.
Borrower will deliver to Agent:
7.1.1. as soon as available and in any event within 90 days after the
end of each fiscal year of Borrower, a consolidated balance sheet of Borrower as
of the end of such fiscal year and the related consolidated statements of funds
from operations, earnings, and cash flows for such fiscal year, setting forth in
each case in comparative form the figures for the previous fiscal year, all
(other than any statement of funds from operations) reported on in a manner
acceptable to Agent by independent public accountants of nationally recognized
standing;
7.1.2. as soon as available and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year of Borrower,
a consolidated balance sheet of Borrower as of the end of such quarter and the
related consolidated statements of funds from operations or earnings,
stockholders' equity and cash flows for such quarter and for the portion of
Borrower's fiscal year ended at the end of such quarter, setting forth in
comparative form the figures for the corresponding quarter and the corresponding
portion of Borrower's previous fiscal year, all certified (subject to normal
year-end adjustments) as to fairness of presentation, GAAP (subject to absence
of full footnote disclosures and other than the statement of funds from
operations) and consistency by the chief financial officer or controller of
Borrower (which officer shall be authorized to so certify such statements);
7.1.3. simultaneously with the delivery of each set of financial
statements referred to in the immediately preceding clauses (a) and (b), a
certificate of the chief financial officer or controller of Borrower (which
officer shall be authorized to execute such certificate) (i) setting forth in
reasonable detail the calculations required to establish whether Borrower was in
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compliance with the requirements of Article 8 on the date of such financial
statements, (ii) stating whether any Default or Event of Default is known to
Borrower on the date of such certificate and, if any Default or Event of Default
is then known to Borrower, setting forth the details thereof and the action
which Borrower is taking or proposes to take with respect thereto, (iii) setting
forth a schedule of all Contingent Obligations of Borrower as of the date of
such financial statements, and (iv) setting forth a schedule of the total assets
of each Subsidiary of Borrower that is not a Wholly Owned Subsidiary;
7.1.4. as soon as available and in any event within 45 days after the
end of each fiscal quarter of Borrower, an Unencumbered Pool Certificate setting
forth the information to be contained therein as of the last day of such fiscal
quarter;
7.1.5. within 45 days after the end of each fiscal quarter of Borrower,
a summary statement of Net Operating Income and occupancy rates for each
Unencumbered Pool Property; provided, as to any specific Property, Agent shall
have the right to require Borrower to deliver such information on a monthly
basis;
7.1.6. within 45 days after the end of each fiscal quarter of Borrower,
a current rent roll for each Unencumbered Pool Property; provided, as to any
specific Property Agent shall have the right to require Borrower to deliver such
information on a monthly basis;
7.1.7. within 45 days after the beginning of each calendar year, a
projected cash flow statement of Borrower and its Subsidiaries, in a form
satisfactory to Agent, for such calendar year, prepared on a quarterly basis and
setting forth the estimates and assumptions (including without limitation, with
respect to costs, revenues, general economic conditions, seasonal variations,
financial and market conditions and results of operations) on which such
projections are based;
7.1.8. no later than 30 days before the end of each fiscal year of
Borrower, a property budget for each Unencumbered Pool Property for the coming
fiscal year of Borrower;
7.1.9. promptly upon receipt thereof, copies of all management reports
relating to the financial condition of Borrower submitted to Borrower or its
Board of Trustees by Borrower's independent public accountants;
7.1.10. within ten days after any secretary, senior vice president,
managing director or other officer of higher rank of Borrower obtains knowledge
of any Default or Event of Default, a certificate of the chief financial officer
or controller of Borrower setting forth the details thereof and the action which
Borrower is taking or proposes to take with respect thereto;
7.1.11. promptly upon the mailing thereof to the shareholders of
Borrower generally, copies of all financial statements, reports, offering
memoranda and proxy statements so mailed;
7.1.12. promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent), reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) and all other periodic reports, if any, which Borrower or any of
its Subsidiaries which it directly or indirectly controls shall file with the
Securities and Exchange Commission (or any Governmental Authority substituted
therefor) or any national securities exchange;
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7.1.13. promptly upon the release thereof, copies of all press
releases of Borrower and any of its Subsidiaries which it directly or indirectly
controls;
7.1.14. promptly upon obtaining knowledge thereof, a description in
reasonable detail of (i) any action, suit or proceeding commenced against
Borrower, any of its Subsidiaries or any of the Unencumbered Pool Properties
which is reasonably likely to have a Materially Adverse Effect, and (ii) any
material changes to any of the Unencumbered Pool Properties, including, without
limitation, any contract or agreement regarding the sale, transfer, mortgage or
other encumbrance relating thereto or any default of any major tenant under any
lease thereof;
7.1.15. within 45 days after the end of each fiscal quarter of
Borrower, any change in the list of the Trust Managers and prompt written notice
of any change in the senior management personnel of Borrower;
7.1.16. written notice of the acquisition, incorporation or other
creation of any Subsidiary after the date hereof, such notice to be given within
10 Business Days of such acquisition, incorporation or other creation; and
7.1.17. from time to time such additional information regarding the
financial position or business of Borrower and its Subsidiaries or any Property
as Agent or any Lender may reasonably request.
SECTION 7.2. Payment of Obligations.
Borrower will pay and discharge, and will cause each Subsidiary to pay
and discharge, at or before maturity, all their respective material obligations
and liabilities, including, without limitation, tax liabilities, except where
the same may be contested in good faith by appropriate proceedings unless the
contest thereof would have a Materially Adverse Effect, and will maintain, and
will cause each Subsidiary to maintain, in accordance with GAAP, appropriate
reserves for the accrual of any of the same. Borrower has paid or will pay (or
has caused to be paid or will be caused to be paid) in full (except for such
retainages as may be permitted or required by any Applicable Law to be withheld
pending completion of any improvements) all sums by Borrower or its Subsidiaries
owing or claimed from Borrower or such Subsidiaries for labor, material,
supplies, personal property (whether or not a fixture) and services of every
kind and character used, furnished or installed in or on any Pool Property and
no claim for same exists or will be permitted to be created, except where the
same may be contested in good faith by appropriate proceedings unless the
contest thereof would have a Materially Adverse Effect, and will maintain, and
will cause each Subsidiary to maintain, in accordance with GAAP, appropriate
reserves for the accrual of any of the same.
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SECTION 7.3. Maintenance of Property; Insurance.
7.3.1. Borrower will keep, and will cause each Subsidiary to keep, all
property useful and necessary in its business in good working order and
condition, ordinary wear and tear and insured casualty losses excepted.
7.3.2. Borrower will maintain, and will cause each Subsidiary to
maintain insurance coverage in such amounts and with respect to such risks as is
consistent with insurance maintained by businesses of comparable type and size
in the industry. In addition to the foregoing, Borrower shall maintain insurance
as may be required under the other Loan Documents. Borrower will deliver to
Agent (i) upon request of Agent from time to time full information as to the
insurance carried, (ii) within five days of receipt of notice from any insurer a
copy of any notice of cancellation or material change in coverage from that
existing on the date of this Agreement and (iii) forthwith, notice of any
cancellation or nonrenewal of coverage by Borrower.
SECTION 7.4. Conduct of Business; Maintenance of Existence;
Qualification; Amendment of Declaration of Trust.
7.4.1. Borrower and the other Loan Parties will only engage in the
business of acquiring, developing, owning, managing and operating
income-producing properties comprised primarily of retail properties, together
with related business activities and investments incidental thereto. Nothing in
this subsection shall prohibit Borrower or any other Loan Party from selling
properties from time to time.
7.4.2. Subject to Section 7.7, Borrower will preserve, renew and keep
in full force and effect, and will cause each Subsidiary to preserve, renew and
keep in full force and effect their respective existence and their respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business; provided that nothing in this Section shall prohibit (i) the merger
of a Subsidiary into Borrower or the merger or consolidation of a Subsidiary
with or into another Person if the corporation surviving such consolidation or
merger is a Subsidiary and if, in each case, after giving effect thereto, no
Default or Event of Default shall have occurred and be continuing, and (ii) the
dissolution of a Subsidiary if (A) Borrower's Board of Trust Managers has
determined that such dissolution is in the best interest of Borrower, (B) such
dissolution will not be materially disadvantageous to Lenders and (C) such
dissolution will not have a Materially Adverse Effect.
7.4.3. Borrower will, and will cause each Subsidiary to, qualify and
remain qualified and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification or authorization and where the failure to be so qualified or
authorized would have a Materially Adverse Effect.
7.4.4. Borrower shall not amend, supplement, restate or otherwise
modify its declaration of trust without the prior written consent of the
Majority Lenders unless such amendment, supplement or other modification (i) is
required under or as a result of the Internal Revenue Code or other Applicable
Law, (ii) is required or prudent to maintain Borrower's status as a REIT, or
(iii) does not affect the operation or management of Borrower, the rights and
obligations of any party thereto or any other material provision of the
document.
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SECTION 7.5. Compliance with Laws.
Borrower will comply, and cause each Subsidiary to comply, with all
Applicable Laws, including without limitation, all Environmental Laws and ERISA
and the rules and regulations thereunder, except where compliance therewith is
contested in good faith by appropriate proceedings or the failure to so comply
would not have a Materially Adverse Effect.
SECTION 7.6. Inspection of Property, Books and Records.
Borrower will keep, and will cause each Subsidiary to keep, proper
books of record and account in which full, true and correct entries shall be
made of all dealings and transactions in relation to its business and
activities; and will permit, and will cause each Subsidiary to permit,
representatives of Agent 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 in
Borrower's presence prior to an Event of Default, all at such reasonable times
during business hours and as often as may reasonably be desired and with
reasonable notice so long as no Event of Default shall have occurred and be
continuing.
SECTION 7.7. Consolidations, Mergers, Acquisitions and Sales of
Assets.
Borrower shall not, and shall not permit any Subsidiary to (a)
consolidate or merge with or into, acquire a Substantial Amount of the assets
of, or make any Investment of a Substantial Amount in, any other Person or (b)
sell, lease or otherwise transfer, directly or indirectly, and whether by one or
a series of related transactions, a Substantial Amount of its assets (including
capital stock or other securities of Subsidiaries) to any other Person without
the prior written consent of the Majority Lenders, which consent will not be
unreasonably withheld or delayed and (i) after giving effect thereto, no Default
or Event of Default shall have occurred and be continuing; (ii) in the case of a
consolidation or merger by Borrower or a Subsidiary, Borrower or such
Subsidiary, as applicable, is the survivor thereof and (iii) at the time
Borrower requests Lenders' consent, Borrower shall have delivered to Agent and
Lenders a Compliance Certificate, calculated on a pro forma basis, evidencing
Borrower's continued compliance with the terms and conditions of this Agreement
and the other Loan Documents, including without limitation, the financial
covenants contained in Article 8, after giving effect to such consolidation,
merger, acquisition, Investment, sale, lease or other transfer.
SECTION 7.8. Use of Proceeds and Letters of Credit.
Borrower will only use the proceeds of the Loans made under this
Agreement (a) for the payment of pre-development and development costs incurred
in connection with Properties; (b) to finance acquisitions permitted under
Section 8.6; (c) to finance the repayment of Indebtedness of Borrower; (d) to
finance acquisitions of unimproved real estate and for development as
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Properties; (e) to make Investments permitted by this Agreement; (f) to finance
tenant improvements at the Properties and (g) to provide for the general working
capital needs of Borrower. Borrower will not use any proceeds of the Loans for
the purpose of purchasing or carrying any "margin stock" within the meaning of
Regulations T, U and X if such use would result in a violation of any of
Regulations T, U and X. Borrower will use the Letters of Credit only for the
same purposes for which it may use the proceeds of Loans.
SECTION 7.9. Major Agreements.
Borrower shall, and shall cause each other Loan Party to, duly and
punctually perform and comply with any and all material representations,
warranties, covenants and agreements expressed as binding upon Borrower or such
other Loan Party under any Major Agreement. Without Agent's prior written
consent, Borrower shall not do or knowingly permit to be done anything to impair
materially the value of any of the Major Agreements; provided, Borrower may
terminate a Major Agreement so long as Borrower enters into a materially
comparable replacement agreement.
SECTION 7.10. Major Construction.
Borrower shall give Agent not less than 60-days' prior written notice
before commencing any construction, remodeling or demolition project or series
of related projects with respect to an Eligible Property of Borrower or any
Subsidiary, the aggregate cost of which will exceed $250,000. If (a) any such
project would reasonably be expected to have a Materially Adverse Effect or (b)
the aggregate cost of such project will exceed $2,000,000, then Borrower or such
Subsidiary, as applicable, shall not commence such project without the prior
written consent of the Majority Lenders.
SECTION 7.11. ERISA.
Borrower will not and will not permit any Subsidiary to at any time
maintain any Plan subject to the provisions of ERISA and will not at any time be
a member of any ERISA Group with any Person that has at any time maintained any
such Plan.
SECTION 7.12. ERISA Exemptions.
Borrower shall not, and shall not permit any of its Subsidiaries to,
permit any of its assets to become or be deemed to be "plan assets" within the
meaning of ERISA, the Internal Revenue Code and the respective regulations
promulgated thereunder, of any ERISA Plan or any Non-ERISA Plan.
SECTION 7.13. Negative Pledge.
Borrower will not, and will not permit any Subsidiary to, (a) create,
assume or suffer to exist any Lien on any Pool Property, or any direct or
indirect ownership interest of Borrower in any Subsidiary owning any Pool
Property, except for Permitted Liens; or (b) create or otherwise cause or suffer
to exist or become effective, any consensual encumbrance or restriction of any
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kind on the ability of any Subsidiary: (i) if such Subsidiary is a Loan Party,
to pay or perform its obligations under the Guaranty to which it is a party
prior to its obligation to pay dividends or make any other distribution on any
of such Subsidiary's capital stock or other securities owned by Borrower or any
Subsidiary of Borrower; (ii) to pay any Indebtedness owed to Borrower or any
other Subsidiary; (iii) to make loans or advances to Borrower or any other
Subsidiary; or (iv) to transfer any of its property or assets to Borrower or any
other Subsidiary.
SECTION 7.14. REIT Status.
Borrower will maintain qualified as a real estate investment trust
pursuant to Section 856 of the Internal Revenue Code.
SECTION 7.15. Agreements with Affiliates.
Borrower shall not, and shall not permit any of its Consolidated
Subsidiaries to, enter into any transaction requiring such Person to pay any
amounts to or otherwise transfer property to, or pay any management or other
fees to, any Affiliate other than on terms and conditions (a) substantially as
favorable to Borrower or such Consolidated Subsidiary as would be obtainable at
the time in a comparable arm's length transaction with a Person not an Affiliate
or (b) which comply with the requirements of the Statement of Policy for Real
Estate Investment Trusts promulgated by the North American Security
Administrators Association, as amended from time to time.
SECTION 7.16. New Subsidiaries.
Upon any Person becoming a Subsidiary of Borrower after the date
hereof, Borrower shall cause such Subsidiary to deliver to Agent within 15 days
of such event each of the following items (if not previously delivered to
Agent):
7.16.1. an accession agreement in the form of Annex I to the Guaranty
duly executed by such Subsidiary;
7.16.2. the articles of incorporation, articles of organization,
certificate of limited partnership or other comparable organizational instrument
(if any) of such Subsidiary certified as of a recent date by the Secretary of
State of the State of formation of such Subsidiary;
7.16.3. a Certificate of Good Standing or certificate of similar
meaning with respect to such Subsidiary issued as of a recent date by the
Secretary of State of the State of formation of such Subsidiary and certificates
of qualification to transact business or other comparable certificates issued by
each Secretary of State (and any state department of taxation, as applicable) of
each state in which such Subsidiary is required to be so qualified;
7.16.4. a certificate of incumbency signed by the Secretary or
Assistant Secretary (or other individual performing similar functions) of such
Subsidiary with respect to each of the officers of such Subsidiary authorized to
execute and deliver the Loan Documents to which such Guarantor is a party;
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7.16.5. copies certified by the Secretary or Assistant Secretary of
such Subsidiary (or other individual performing similar functions) of (i) the
by-laws of such Subsidiary, if a corporation, the operating agreement, if a
limited liability company, the partnership agreement, if a limited or general
partnership, or other comparable document in the case of any other form of legal
entity and (ii) all corporate, partnership, member or other necessary action
taken by such Subsidiary to authorize the execution, delivery and performance of
the Loan Documents to which it is a party;
7.16.6. an opinion of legal counsel to such Subsidiary, regarding the
due formation and good standing of such Subsidiary, the enforceability of the
Loan Documents to which it is a party, and such other matters as Agent shall
request; and
7.16.7. such other documents and instruments as Agent may reasonably
request.
SECTION 7.17. Management.
Should Kerr Taylor cease to be a Trust Manager and/or an executive
officer of Borrower, Borrower shall replace such vacancy with a person
reasonably acceptable to the Majority Lenders within 180 days after the vacancy
shall occur.
SECTION 7.18. Year 2000 . Borrower shall ensure that the following are
Year 2000 Compliant in a timely manner, but in no event later than December 31,
1999: (a) the Property; (b) Borrower itself; and (c) any other major commercial
properties and entities in which Borrower holds a controlling interest. Borrower
shall further make reasonable inquiries of and request reasonable validation
that each of the following are similarly Year 2000 Compliant: (x) all Major
Space Leases and other Major Agreements or other "Major" agreements pursuant to
which Borrower receives payments; and (y) all "major" contractors, suppliers,
service providers and vendors of Borrower. As used in this paragraph, "major"
shall mean properties or entities the failure of which to be Year 2000 Compliant
would have a Materially Adverse Effect. The term "Year 2000 Compliant" shall
mean, in regard to any property or entity, that all software, hardware,
equipment, goods or systems utilized by or material to the physical operations,
business operations, or financial reporting of such property or entity
(collectively, the "systems") will properly perform date sensitive functions
before, during and after the year 2000. In furtherance of this covenant,
Borrower shall, in addition to any other necessary actions perform a
comprehensive review and assessment of all systems of Borrower and the Property
and shall adopt a detailed plan, with itemized budget, for the testing,
remediation, and monitoring of such systems. Borrower shall, within thirty
business days of Lender's written request, provide to Lender such certifications
or other evidence of Borrower's compliance with the terms of this paragraph as
Lender may from time to time reasonably require.
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ARTICLE 8.
FINANCIAL COVENANTS
Borrower agrees that, so long as Lenders have any Commitments hereunder
or any Obligation remains unpaid:
SECTION 8.1. Minimum Net Worth.
Borrower shall not at any time permit the Net Worth of Borrower and its
Consolidated Subsidiaries to be less than (a) $15,901,504, plus (b) 90% of the
amount of proceeds in cash or property (net of transaction costs) received by
Borrower or any Subsidiary from the sale or issuance by Borrower of Shares,
options, warrants or other equity securities of any class or character after
June 30, 1998.
SECTION 8.2. Ratio of Total Liabilities to Gross Asset Value.
Borrower shall not at any time permit the ratio of (a) Total
Liabilities of Borrower and its Consolidated Subsidiaries to (b) Gross Asset
Value of Borrower and its Consolidated Subsidiaries to exceed 0.6 to 1.0;
provided that for up to six consecutive months such ratio may exceed 0.6 to 1.0
so long as such ratio does not exceed 0.65 to 1.0.
SECTION 8.3. Distributions.
If an Event of Default under Section 9.1(a) shall have occurred and be
continuing, Borrower shall not directly or indirectly declare or make, or incur
any liability to make, any Restricted Payments. If any other Event of Default
shall have occurred and be continuing, Borrower shall not directly or indirectly
declare or make, or incur any liability to make, any Restricted Payments except
that Borrower may make distributions to its shareholders in the minimum amount
necessary to maintain compliance with Section 7.14. If no Event of Default, or
any Event of Default other than those specified above, shall have occurred and
be continuing, Borrower shall not directly or indirectly declare or make, or
incur any liability to make, any Restricted Payments other than Permitted
Distributions.
SECTION 8.4. Ratio of EBITDA to Interest Expense.
Borrower shall not permit the ratio of (a) EBITDA of Borrower and its
Consolidated Subsidiaries to (b) Interest Expense of Borrower and its
Consolidated Subsidiaries for any consecutive four-fiscal quarter period to be
less than 2.00 to 1.0 at the end of such period.
SECTION 8.5. Ratio of EBITDA to Debt Service and Capital
Expenditures Reserve.
Borrower shall not permit the ratio of (a) EBITDA of Borrower and its
Consolidated Subsidiaries to (b) the sum of Debt Service of Borrower and its
Consolidated Subsidiaries plus the Capital Expenditures Reserve for all
Properties (prorated for the period owned if such period is less than one year)
for any consecutive four-fiscal quarter period to be less than 1.75 to 1.00 for
such period.
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SECTION 8.6. Permitted Investments.
8.6.1. Borrower shall not, and shall not permit any Subsidiary to, make
any Investment in or otherwise own the following items which would cause the
value of such holdings of Borrower and its Consolidated Subsidiaries to exceed
the following percentages of Gross Asset Value:
8.6.1.1. unimproved real estate (excluding unimproved real
estate on which development of a Property has commenced and excluding
unimproved real estate owned by Borrower on the Effective Date) such
that the aggregate book value of all such unimproved real estate
exceeds 5% of Gross Asset Value;
8.6.1.2. Mortgages in favor of Borrower or such Subsidiary,
such that the aggregate book value of Indebtedness secured by such
Mortgages exceeds 20% of Gross Asset Value;
8.6.1.3. Capital Stock of any Unconsolidated Affiliate and
Investments in partnerships, joint ventures and other non-corporate
Persons accounted for on an equity basis (determined in accordance with
GAAP), such that the aggregate book value of such Capital Stock and
Investments exceeds 15% of Gross Asset Value;
8.6.1.4. Properties in the process of development, such that
the aggregate book value of all such Properties under development
exceeds 20% of Gross Asset Value;
8.6.1.5. Non-retail Properties (excluding non-retail
Properties owned by the Borrower on the Effective Date or under option
by the Borrower on the Effective Date), such that the aggregate book
value of all such non-retail Properties exceeds 5% of Gross Asset
Value;
8.6.2. In addition to the foregoing limitations, the aggregate value of
the Investments subject to the limitations in the preceding clauses (i) through
(iv) shall not exceed 30% of Gross Asset Value.
SECTION 8.7. Other Secured Indebtedness.
Borrower will not permit more than 75% of the Gross Asset Value of its
assets to be encumbered by Liens to secure Indebtedness which is
cross-collateralized with other Indebtedness without prior written consent of
the Majority Lenders.
SECTION 8.8. Ratio of Secured Indebtedness to Gross Asset Value.
Borrower will not permit the ratio of (a) Secured Indebtedness of
Borrower and its Consolidated Subsidiaries to (b) Gross Asset Value to exceed
0.35 to 1.0.
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SECTION 8.9. Maximum Loan Availability.
Borrower will not at any time permit the aggregate principal amount of
all outstanding Revolving Loans, together with the aggregate amount of all
Letter of Credit Liabilities, exceed the lesser of (a) Maximum Loan Availability
at such time, or (b) the aggregate amount of Lender's Commitments.
ARTICLE 9.
DEFAULTS
SECTION 9.1. Events of Default.
If one or more of the following events shall have occurred and be
continuing:
9.1.1. (i) Borrower shall fail to pay when due any Reimbursement
Obligation or any principal of any Loan or other Obligation, or (ii) Borrower
shall fail to pay when due any interest, fees or other Obligation and such
failure under this clause (ii) shall continue for a period of five days after
notice that such payment is due and payable;
9.1.2. Borrower shall fail to observe or perform any covenant or
agreement contained in Section 7.7, Sections 7.11 through 7.14, inclusive or
Section 8.9;
9.1.3. Borrower shall fail to comply with any of the covenants or
agreements contained in Article 8 (other than Section 8.9), and Borrower shall
remain in noncompliance with any such Section after 30 days following the first
failure to comply with such Section;
9.1.4. Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by the
immediately preceding clauses (a) through (c)) for a period of 30 days after
written notice thereof has been given to Borrower by Agent;
9.1.5. An Event of Default under and as defined in any Loan Document
shall occur and be continuing or Borrower shall fail to observe or perform any
covenant or agreement contained in any of the Loan Documents and such failure
shall continue beyond any applicable period of grace;
9.1.6. any representation, warranty, certification or statement made or
deemed made by or on behalf of any Loan Party in this Agreement or in any
certificate, financial statement or other Loan Document delivered pursuant to
this Agreement shall prove to have been incorrect or misleading in any material
respect when made or deemed made;
9.1.7. the maturity of any Indebtedness (excluding non-recourse
Indebtedness of less than $1,000,000 in the aggregate) shall have been (i)
accelerated in accordance with the provisions of any indenture, contract or
instrument providing for the creation of or concerning such Indebtedness or (ii)
required to be prepaid in full prior to the stated maturity thereof;
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9.1.8. Borrower or any other Loan Party 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 to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
9.1.9. an involuntary case or other proceeding shall be commenced
against Borrower or any other Loan Party 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 any such Person under the federal bankruptcy
laws as now or hereafter in effect;
9.1.10. a judgment or order for the payment of money in excess of
$250,000 shall be rendered against Borrower or any other Loan Party and such
judgment or order shall continue unsatisfied and unstayed for a period of thirty
days;
9.1.11. the assets of Borrower or any other Loan Party at any time
constitute assets, within the meaning of ERISA, the Internal Revenue Code and
the respective regulations promulgated thereunder, of any ERISA Plan or
Non-ERISA Plan; or
9.1.12. any Guarantor shall fail to comply with any term, covenant,
condition or agreement contained in the Guaranty (after giving effect to any
applicable grace or cure periods) or any Guarantor shall disallow, revoke or
terminate or attempt to do any of the foregoing with respect to the Guaranty.
SECTION 9.2. Remedies Upon an Event of Default.
Upon the occurrence of an Event of Default, and in every such event,
Agent shall, upon the direction of the Majority Lenders, (i) by notice to
Borrower terminate the Commitments, which shall thereupon terminate, (ii) by
notice to Borrower declare the Loans and all other Obligations and an amount
equal to the Stated Amount of all Letters of Credit then outstanding, and the
Loans and all other Obligations and an amount equal to the Stated Amount of all
Letters of Credit then outstanding shall thereupon become, immediately due and
payable without presentment, demand, protest or notice of intention to
accelerate, all of which are hereby waived by Borrower; and (iii) exercise all
rights and remedies available under all of the Loan Documents. Notwithstanding
the foregoing, upon the occurrence of any of the Events of Default specified in
clause (h) or (i) above, without any notice to Borrower or any other act by
Agent, the Commitments shall thereupon immediately and automatically terminate
and the Loans and all other Obligations and an amount equal to the Stated Amount
of all Letters of Credit then outstanding shall become immediately due and
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payable without presentment, demand, protest, notice of intention to accelerate
or notice of acceleration, or other notice of any kind, all of which are hereby
waived by Borrower.
SECTION 9.3. Additional Remedies Upon Certain Default.
In addition to the other rights and remedies of Agent and Lenders upon
the occurrence and during the continuance of a Default, upon the occurrence and
during the continuance of a Default under Section 9.1(c), Lenders shall not be
obligated to make any Revolving Loans.
SECTION 9.4. Rescission of Acceleration by Majority Lenders.
If at any time after acceleration of the maturity of the Loans,
Borrower shall pay all arrears of interest and all payments on account of
principal of the Loans and the other Obligations which shall have become due
otherwise than by acceleration (with interest on principal and, to the extent
permitted by Applicable Law, on overdue interest, at the rates specified in this
Agreement) and all Events of Default and Defaults (other than nonpayment of
principal of and accrued interest on the Loans and other Obligations due and
payable solely by virtue of acceleration) shall be remedied or waived, then by
written notice to Borrower, the Majority Lenders may elect, in their sole
discretion, to rescind and annul such acceleration and its consequences; but
such action shall not affect any subsequent Default or Event of Default or
impair any right or remedy consequent thereon. The provisions of the preceding
sentence are intended merely to bind all Lenders to a decision which may be made
at the election of the Majority Lenders and are not intended to benefit Borrower
and do not give Borrower the right to require Lenders to rescind or annul any
acceleration hereunder, even if the conditions set forth herein are satisfied.
SECTION 9.5. Allocation of Proceeds.
If an Event of Default shall have occurred and be continuing and the
maturity of the Notes has been accelerated, all payments received by Agent under
any of the Loan Documents, in respect of any principal of or interest on the
Obligations or any other amounts payable by Borrower hereunder or thereunder,
shall be applied by Agent in the following order and priority:
9.5.1. amounts due to Agent and Lenders in respect of fees and
expenses due under Section 11.3;
9.5.2. payments of interest on all Loans and Reimbursement
Obligations, to be applied for the ratable benefit of the Lenders;
9.5.3. payments of principal of all Loans and Reimbursement
Obligations, to be applied for the ratable benefit of Lenders;
9.5.4. amounts to be deposited into the Collateral Account;
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9.5.5. amounts due to Agent and Lenders pursuant to Sections 10.7
and 11.5;
9.5.6. payments of all other amounts due under any of the Loan
Documents, if any, to be applied for the ratable benefit of Lenders; and
9.5.7. any amount remaining after application as provided above, shall
be paid to Borrower or whomever else may be legally entitled thereto.
SECTION 9.6. Collateral Account.
9.6.1. As collateral security for the prompt payment in full when due
of all Letter of Credit Liabilities, Borrower hereby pledges and grants to
Agent, for the benefit of the Issuing Bank and Lenders as provided herein, a
security interest in all of Borrower's right, title and interest in and to the
Collateral Account and the balances from time to time in the Collateral Account
(including the investments and reinvestments therein provided for below). The
balances from time to time in the Collateral Account shall not constitute
payment of any Letter of Credit Liabilities until applied by Agent as provided
herein. Anything in this Agreement to the contrary notwithstanding, funds held
in the Collateral Account shall be subject to withdrawal only as provided in
this Section.
9.6.2. Amounts on deposit in the Collateral Account shall be invested
and reinvested by Agent in such investments as Agent shall determine in its sole
discretion. All such investments and reinvestments shall be held in the name of
and be under the sole dominion and control of Agent. Agent shall exercise
reasonable care in the custody and preservation of any funds held in the
Collateral Account and shall be deemed to have exercised such care if such funds
are accorded treatment substantially equivalent to that which Agent accords
other funds deposited with Agent, it being understood that Agent shall not have
any responsibility for taking any necessary steps to preserve rights against any
parties with respect to any funds held in the Collateral Account.
9.6.3. If an Event of Default shall have occurred and be continuing,
Agent may (and, if instructed by the Requisite Lenders or the Issuing Bank,
shall) in its (or their) discretion at any time and from time to time elect to
liquidate any such investments and reinvestments and credit the proceeds thereof
to the Collateral Account and apply or cause to be applied such proceeds and any
other balances in the Collateral Account to the payment of any of the Letter of
Credit Liabilities then due and payable.
9.6.4. When all of the Obligations shall have been indefeasibly paid in
full and no Letters of Credit remain outstanding, Agent shall promptly deliver
to Borrower, against receipt but without any recourse, warranty or
representation whatsoever, the balances remaining in the Collateral Account.
9.6.5. Borrower shall pay to Agent from time to time such fees as Agent
normally charges for similar services in connection with Agent's administration
of the Collateral Account and investments and reinvestments of funds therein.
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ARTICLE 10.
THE AGENT
SECTION 10.1. Appointment and Authorization.
Each Lender irrevocably appoints and authorizes Agent to take such
action as contractual representative on its behalf and to exercise such powers
under the Loan Documents as are delegated to Agent by the terms thereof,
together with all such powers as are reasonably incidental thereto. Borrower
shall be entitled to rely conclusively upon a written notice or written response
from Agent as being made pursuant to the requisite concurrence or consent of
Lenders necessary to take such action without investigation or otherwise
contacting Lenders hereunder. The relationship between Agent and Lenders shall
be that of principal and agent only and nothing herein shall be construed to
deem Agent a trustee for any Lender nor to impose on Agent duties or obligations
other than those expressly provided for herein. Not in limitation of the
foregoing, each Lender agrees Agent has no fiduciary obligations to such Lender
under this Agreement, any other Loan Document or otherwise. At the request of a
Lender, Agent will forward to each Lender copies or, where appropriate,
originals of the documents delivered to Agent pursuant to Section 5.1. Agent
will also furnish to any Lender, upon the request of such Lender, a copy of any
certificate or notice furnished to Agent by Borrower pursuant to this Agreement
or any other Loan Document not already delivered to such Lender pursuant to the
terms of this Agreement or any such other Loan Document. As to any matters not
expressly provided for by the Loan Documents (including, without limitation,
enforcement or collection of the Notes), Agent shall not be required to exercise
any discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Majority Lenders, and such instructions
shall be binding upon all Lenders and all holders of Notes; provided, however,
that Agent shall not be required to take any action which exposes Agent to
personal liability or which is contrary to this Agreement or any other Loan
Document or Applicable Law. Not in limitation of the foregoing, Agent shall not
exercise any right or remedy it or Lenders may have under any Loan Document upon
the occurrence of a Default or an Event of Default unless the Majority Lenders
have so directed Agent to exercise such right or remedy. Agent shall not be
deemed to have knowledge or notice of the occurrence of a Default or Event of
Default unless Agent has actual knowledge of such Default or Event of Default.
In the event that Agent has actual knowledge of the occurrence of a Default or
Event of Default, Agent shall give prompt notice thereof to Lenders.
SECTION 10.2. Agent and Affiliates.
Wells Fargo Bank, National Association, as a Lender, shall have the
same rights and powers under this Agreement and any other Loan Document as any
other Lender and may exercise the same as though it were not Agent; and the term
"Lender" or "Lenders" shall, unless otherwise expressly indicated, include Wells
Fargo Bank, National Association, in each case in its individual capacity. Wells
Fargo Bank, National Association and its affiliates and the other Lenders and
their respective affiliates may each accept deposits from, maintain deposits or
credit balances for, invest in, lend money to, act as trustee under indentures
of, and generally engage in any kind of business with Borrower, any of its
Subsidiaries and any other Affiliate of Borrower as if Wells Fargo Bank,
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National Association or such Lender were any other bank and without any duty to
account therefor to the other Lenders.
SECTION 10.3. Collateral Matters.
Each Lender authorizes and directs Agent to enter into the Loan
Documents for the benefit of Lenders. Each Lender hereby agrees that, except as
otherwise set forth herein, any action taken by the Majority Lenders in
accordance with the provisions of this Agreement or the Loan Documents, and the
exercise by the Majority Lenders of the powers set forth herein or therein,
together with such other powers as are reasonably incidental thereto, shall be
authorized and binding upon all Lenders.
SECTION 10.4. Approvals of Lenders.
All communications from Agent to any Lender requesting such Lender's
determination, consent, approval or disapproval (a) shall be given in the form
of a written notice to such Lender, (b) shall be accompanied by a description of
the matter or thing as to which such determination, approval, consent or
disapproval is requested, or shall advise such Lender where such matter or thing
may be inspected, or shall otherwise describe the matter or issue to be
resolved, (c) shall include, if reasonably requested by such Lender and to the
extent not previously provided to such Lender, written materials and a summary
of all oral information provided to Agent by Borrower in respect of the matter
or issue to be resolved, and (d) shall include Agent's recommended course of
action or determination in respect thereof. Each Lender shall reply promptly,
but in any event within ten Business Days (or such shorter or longer period as
may be required under the Loan Documents for Agent to respond). Unless a Lender
shall give written notice to Agent that it objects to the recommendation or
determination of Agent (together with a written explanation of the reasons
behind such objection) within the applicable time period for reply, such Lender
shall be deemed to have conclusively approved of or consented to such
recommendation or determination.
SECTION 10.5. Consultation with Experts.
Agent may consult with legal counsel (who may be counsel for Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 10.6. Liability of Agent.
Neither Agent nor any of its affiliates nor any of their respective
directors, officers, agents or employees shall be liable for any action taken or
not taken by Agent in connection with any of the Loan Documents in the absence
of its own gross negligence or willful misconduct. Neither Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or verify
(a) any statement, warranty or representation made in connection with any of the
Loan Documents, or any borrowing hereunder, (b) the performance or observance of
any of the covenants or agreements of Borrower or any other Loan Party, (c) the
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satisfaction of any condition specified in Article 5, or (d) the validity,
effectiveness or genuineness of any of the Loan Documents or any other
instrument or writing furnished in connection herewith or therewith. Agent shall
not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties.
SECTION 10.7. Indemnification of Agent.
Lenders agree to indemnify Agent (to the extent not reimbursed by
Borrower and without limiting the obligation of Borrower to do so) in accordance
with Lenders' respective Pro Rata Shares, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time be imposed on, incurred by, or asserted against Agent in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by Agent under the Loan Documents; provided, however, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements (i) to
the extent arising from Agent's gross negligence or willful misconduct or (ii)
if Agent fails to follow the written direction of the Majority Lenders unless
such failure is pursuant to Agent's good faith reliance on the advice of counsel
of which Lenders have received notice. Without limiting the generality of the
foregoing, each Lender agrees to reimburse Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel fees) incurred by
Agent in connection with the preparation, execution, administration, or
enforcement of, or legal advice with respect to the rights or responsibilities
of the parties under, the Loan Documents, to the extent that Agent is not
reimbursed for such expenses by Borrower. The agreements in this Section shall
survive the payment of the Loans and all other amounts payable hereunder or
under the other Loan Documents and the termination of this Agreement.
SECTION 10.8. Credit Decision.
Each Lender expressly acknowledges that neither Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or other affiliates
has made any representations or warranties to such Lender and that no act by
Agent hereinafter taken, including any review of the affairs of Borrower or any
of the Properties, shall be deemed to constitute any representation or warranty
by Agent to any Lender. Each Lender acknowledges that it has, independently and
without reliance upon Agent, any other Lender or counsel to Agent, and based on
the financial statements of Borrower and its affiliates, its review of the Loan
Documents, the legal opinions required to be delivered to it hereunder, the
advice of its own counsel and such other documents and information as it has
deemed appropriate, including without limitation, such documents and information
regarding the Properties, made its own credit and legal analysis and decision to
enter into this Agreement and the transaction contemplated hereby. Each Lender
also acknowledges that it will, independently and without reliance upon Agent,
any other Lender or counsel to Agent, and based on such review, advice,
documents and information as it shall deem appropriate at the time, continue to
make its own decisions in taking or not taking action under the Loan Documents.
Except for notices, reports and other documents expressly required to be
furnished to Lenders by Agent hereunder, Agent shall have no duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of Borrower, any of its Subsidiaries or any other Affiliate of
Borrower which may come into possession of Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or other affiliates.
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SECTION 10.9. Successor Agent.
Agent may resign at any time by giving 30 days' prior written notice
thereof, to Lenders and Borrower. Agent may be removed as Agent under the Loan
Documents for good cause upon 30 days' prior written notice to Agent by all of
the Lenders (excluding Agent as Lender); provided, however, that the Agent
cannot be removed if there are fewer than three Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Majority Lenders, and shall have accepted such appointment, within 30 days after
the current Agent's giving of notice of resignation or the Majority Lenders'
removal of the current Agent, then the current Agent may, on behalf of Lenders,
appoint a successor Agent, which shall be a Lender, if any Lender shall be
willing to serve. Any successor Agent must be a bank whose senior unsecured debt
obligations (or whose parent's senior unsecured debt obligations) are rated not
less than investment grade or its equivalent by Moody's Investors Service, Inc.
or not less than investment grade or its equivalent by Standard & Poor's Ratings
Group, a division of McGraw-Hill, Inc. and which has total assets in excess of
$10,000,000,000. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the current Agent, and the current
Agent shall be discharged from its duties and obligations hereunder. The current
Agent shall at the expense of Borrower execute and deliver to such successor
Agent such instruments of transfer as may be reasonably necessary to accomplish
such succession. After any current Agent's resignation hereunder as Agent, the
provisions of this Article shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent. Notwithstanding anything herein to
the contrary, Agent may assign its rights and duties under this Agreement to any
Affiliate of the Agent without the consent of the Lenders or Borrower.
SECTION 10.10. Approvals and Other Actions by Majority Lenders.
Each of the following shall require the approval of, or may be taken at
the request of, the Majority Lenders:
10.10.1. Approving certain major construction on or renovation to
Eligible Properties as provided in Section 7.10;
10.10.2. Termination of the Commitments and acceleration of the
Obligations upon the occurrence of an Event of Default as provided in
Section 9.2;
10.10.3. Rescission of acceleration of the Loans and the other
Obligations as provided in Section 9.4;
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10.10.4. Direction of Agent to undertake rights and remedies upon a
Default or Event of Default as provided in Section 10.1;
10.10.5. Approval of an Eligible Property as an Unencumbered Pool
Property pursuant to Section 4.1(b);
10.10.6. Approving the replacement of Agent after Agent's removal as
provided in Section 10.9; and
10.10.7. Except as specifically provided otherwise in Section 11.7, any
consent or approval regarding, any waiver of the performance or observance by
Borrower of and the waiver of the continuance of any Default or Event of Default
in respect of, any term of this Agreement or any other Loan Document.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.1. Notices.
All notices, requests and other communications to any party under the
Loan Documents shall be in writing (including facsimile transmission or similar
writing) and shall be given to such party as follows:
If to Borrower:
AmREIT, Inc.
Eight Greenway Plaza, Suite 824
Houston, Texas 77046
Attention: Mr. Kerr Taylor
Telecopier: (713) 850-0498
Telephone: (713) 850-1400
If to a Lender or Agent:
To such Lender's or Agent's Lending Office at the address set
forth on the signature pages of this Agreement
or as to each party at such other address as such party shall designate in a
written notice to the other parties. Each such notice, request or other
communication shall be effective (a) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (b) if given by any other means (including facsimile),
when delivered at the applicable address provided for in this Section; provided
that notices to Agent under Article 2, and any notice of a change of address for
notices, shall not be effective until received. In addition to Agent's Lending
Office, Borrower shall send copies of the information described in Section 7.1
to the following address of Agent:
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Wells Fargo Bank, National Association
Disbursement and Operations Center
2120 East Park Place, Suite 100
El Segundo, California 90245
Attention: Mr. David Cannon
with a copy to:
Wells Fargo Bank, National Association
1000 Louisiana, 4th Floor
Houston, Texas 77002-5093
Attention: Mr. David C. Williams
SECTION 11.2. No Waivers.
No failure or delay by Agent, the Issuing Bank or any Lender in
exercising any right, power or privilege under any 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 provided in the Loan Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 11.3. Expenses.
Borrower will pay on demand all present and future reasonable expenses
actually incurred by Persons who are not employees of, and other third parties
engaged by:
11.3.1. Agent in connection with the negotiation, preparation,
execution, delivery and administration (including reasonable out-of-pocket costs
and expenses incurred by Agent and its counsel (but not any Assignee,
Participant or its respective counsel) in connection with the assignment of
Commitments pursuant to Section 11.8) of this Agreement, the Notes and each of
the other Loan Documents, whenever the same shall be executed and delivered,
including, without limitation, title insurance premiums, survey costs and
expenses, appraisers' fees, environment engineers' fees, search fees, recording
fees, mortgage recording taxes, and the reasonable fees and disbursements of:
(i) Winstead Sechrest & Minick P.C., counsel for Agent, and (ii) each local
counsel reasonably retained by Agent;
11.3.2. Agent in connection with the review of Properties for
acceptance as Unencumbered Pool Properties and Agent's other activities under
Section 4.1, including reasonable fees and disbursements of counsel to Agent;
11.3.3. Agent in connection with the negotiation, preparation,
execution and delivery of any waiver, amendment or consent by Agent or any
Lender relating to this Agreement, the Notes or any of the other Loan Documents,
including the reasonable fees and disbursements of counsel to Agent;
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11.3.4. Agent, Issuing Bank and each Lender in connection with any
restructuring, refinancing or "workout" of the transactions contemplated by this
Agreement, the Notes and the other Loan Documents, including the reasonable fees
and disbursements of counsel to Agent;
11.3.5. Agent, Issuing Bank and each Lender, after the occurrence of a
Default or Event of Default, in connection with the collection or enforcement of
the obligations of Borrower under this Agreement, the Notes or any other Loan
Document, including the reasonable fees and disbursements of counsel to Agent,
Issuing Bank or to any Lender if such collection or enforcement is done by or
through an attorney;
11.3.6. Subject to any limitation contained in Section 11.5, Agent,
Issuing Bank and each Lender in connection with prosecuting or defending any
claim in any way arising out of, related to, or connected with this Agreement,
the Notes or any of the other Loan Documents, including the reasonable fees and
disbursements of counsel to Agent, Issuing Bank or any Lender and of experts and
other consultants retained by Agent or any Lender in connection therewith;
11.3.7. Agent, Issuing Bank and each Lender, after the occurrence of a
Default or Event of Default, in connection with the exercise by Agent, Issuing
Bank or any Lender of any right or remedy granted to it under this Agreement,
the Notes or any of the other Loan Documents including the reasonable fees and
disbursements of counsel to Agent, Issuing Bank or any Lender;
11.3.8. Agent in connection with gaining possession of, maintaining,
appraising, selling, preparing for sale and advertising to sell any collateral
security, whether or not a sale is consummated; and
11.3.9. Agent, Issuing Bank and each Lender, to the extent not already
covered by any of the preceding subsections, in connection with any bankruptcy
or other proceeding of the type described in Sections 9.1(h) or (i), and the
reasonable fees and disbursements of counsel to Agent, Issuing Bank and any
Lender actually incurred in connection with the representation of Agent, Issuing
Bank or such Lender in any matter relating to or arising out of any such
proceeding, including without limitation (i) any motion for relief from any stay
or similar order, (ii) the negotiation, preparation, execution and delivery of
any document relating to Agent, Issuing Bank or such Lender and (iii) the
negotiation and preparation of any plan of reorganization of Borrower, whether
proposed by Borrower, Lenders or any other Person, and whether such fees and
expenses are incurred prior to, during or after the commencement of such
proceeding or the confirmation or conclusion of any such proceeding.
SECTION 11.4. Stamp, Intangible and Recording Taxes.
Borrower will pay any and all stamp, intangible, registration,
recordation, mortgage and similar taxes, fees or charges and shall indemnify
Agent, Issuing Bank and each Lender against any and all liabilities with respect
to or resulting from any delay in the payment or omission to pay any such taxes,
fees or charges, which may be payable or determined to be payable in connection
with the execution, delivery, recording, performance or enforcement of this
Agreement, the Notes and any of the other Loan Documents or the perfection of
any rights or Liens thereunder.
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SECTION 11.5. Indemnification.
Borrower shall and hereby agrees to indemnify, defend and hold harmless
Agent, Issuing Bank and each Lender and their respective directors, officers,
agents and employees (each an "Indemnified Party") from and against (a) any and
all losses, claims, damages, liabilities, deficiencies, judgments or expenses
reasonably incurred by any of them (except to the extent that it results from
their own gross negligence or willful misconduct) arising out of or by reason of
any litigation, investigations, claims or proceedings which arise out of or are
in any way related to: (i) this Agreement or the transactions contemplated
thereby; (ii) the making of Loans; (iii) any actual or proposed use by Borrower
of the proceeds of the Loans or of Letters of Credit; or (iv) Agent's, Issuing
Bank's or Lenders' entering into this Agreement, the other Loan Documents or any
other agreements and documents relating hereto, including, without limitation,
amounts paid in settlement, court costs and the reasonable fees and
disbursements of counsel incurred in connection with any such litigation,
investigation, claim or proceeding or any advice rendered in connection with any
of the foregoing and (b) any such losses, claims, damages, liabilities,
deficiencies, judgments or expenses incurred in connection with any remedial or
other similar action taken by Borrower, Agent, Issuing Bank or any of Lenders in
connection with the required compliance by Borrower or any of the Subsidiaries,
or any of their respective properties, with any federal, state or local
Environmental Laws or other material environmental rules, regulations, orders,
directions, ordinances, criteria or guidelines. If and to the extent that the
obligations of Borrower hereunder are unenforceable for any reason, Borrower
hereby agrees to make the maximum contribution to the payment and satisfaction
of such obligations which is permissible under Applicable Law. Borrower's
obligations hereunder shall survive any termination of this Agreement and the
other Loan Documents and the payment in full of the Obligations, and are in
addition to, and not in substitution of, any other of its other obligations set
forth in this Agreement and the other Loan Documents. Borrower shall not be
obligated as provided in this Section to indemnify, defend or hold harmless any
Indemnified Person in respect of any litigation, investigation, claim or
proceeding commenced by any Indemnified Party against another Indemnified Party.
SECTION 11.6. Setoff.
Each Lender hereby expressly waives its right to set-off and apply any
and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured)
and any other indebtedness at any time held or owing by such Lender or any
Affiliate of such Lender, to or for the credit or the account of Borrower
against and on account of any of the Obligations then due and owing.
SECTION 11.7. Amendments.
Any consent or approval required or permitted by this Agreement or in
any other Loan Document (other than any agreement evidencing the fees referred
to in Section 3.1(c)) to be given by Lenders may be given, and the performance
or observance by Borrower of any terms of this Agreement or such other Loan
Document or the continuance of any Default or Event of Default may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Majority Lenders.
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Any provision of this Agreement or of any other Loan Document (other than any
agreement evidencing the fees referred to in Section 3.1(c)) may be amended or
otherwise modified with, but only with, the written consent of Borrower and the
Majority Lenders. Any provision of any agreement evidencing the fees referred to
in Section 3.1(c) may be amended or otherwise modified only in writing by Agent
and Borrower, and the performance or observance by Borrower of any terms of any
such agreement may be waived only with the written consent of Agent.
Notwithstanding the foregoing, none of the following may be amended or otherwise
modified, nor may Borrower's compliance thereunder or with respect thereto be
waived, without the written consent of all Lenders and Borrower:
11.7.1.the principal amount of any Loan (including
forgiveness of any amount of principal);
11.7.2.the rates of interest on the Loans and the
amount of any interest payable on the Loans (including the
forgiveness of any accrued but unpaid interest);
11.7.3.the dates on which any principal or interest
payable by Borrower under any Loan Document is due;
11.7.4.the provisions of the first sentence of
Section 2.1;
11.7.5.the Revolving Credit Termination Date;
11.7.6.any assignment or other transfer by Borrower
of any of its rights under this Agreement;
11.7.7.the release of any Guarantor or any other
Person who has Guaranteed, or is otherwise obligated in
respect of, any Obligations from such Obligations;
11.7.8.the definition of Commitment, Majority Lenders
(or any minimum requirement necessary for Lenders or Majority
Lenders to take action hereunder), Pro Rata Share, Commitment
and Maximum Loan Availability (and the definitions used in
either such definition and the percentages and rates used in
the calculation thereof);
11.7.9.Sections 8.2, 8.4 and 8.5 or any of the
definitions of the terms used in any such Sections;
11.7.10.Section 11.7; and
11.7.11.the amount and payment date of any fees.
Further, no amendment, waiver or consent shall affect the rights or duties of
Agent, or Issuing Bank under this Agreement or any of the other Loan Documents
unless in writing and signed by Agent in addition to Lenders required
hereinabove to take such action. No waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon. No
course of dealing or delay or omission on the part of any Lender or Agent in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon Borrower shall entitle Borrower
to any other or further notice or demand in similar or other circumstances.
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SECTION 11.8. Successors and Assigns.
11.8.1. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that Borrower may not assign or otherwise transfer any of its
rights under this Agreement without the prior written consent of all Lenders.
11.8.2. Any Lender may at any time grant to one or more banks or other
financial institutions which are not affiliates of, or otherwise related in any
way to, Borrower (each a "Participant") participating interests in its
Commitment or the Obligations owing to such Lender; provided, however, no Lender
may grant a participating interest in its Commitment, or if the Commitments have
been terminated, the aggregate outstanding principal balance of Notes held by
it, in an amount less than $10,000,000. Except as otherwise provided in Section
11.6, no Participant shall have any rights or benefits under this Agreement or
any other Loan Document. In the event of any such grant by a Lender of a
participating interest to a Participant, such Lender shall remain responsible
for the performance of its obligations hereunder, and Borrower and Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. Any agreement pursuant to
which any Lender may grant such a participating interest shall provide that such
Lender shall retain the sole right and responsibility to enforce the obligations
of Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided,
however, such Lender may agree with the Participant that it will not, without
the consent of the Participant, agree to (i) increase, or except as contemplated
by Section 2.11, extend the term or extend the time or waive any requirement for
the reduction or termination of, such Lender's Commitment, (ii) extend the date
fixed for the payment of principal of or interest on the Loans or portions
thereof owing to such Lender, (iii) reduce the amount of any such payment of
principal, or (iv) reduce the rate at which interest is payable thereon. An
assignment or other transfer which is not permitted by subsection (c) or (d)
below shall be given effect for purposes of this Agreement only to the extent of
a participating interest granted in accordance with this subsection (b).
11.8.3. Any Lender may with the prior written consent of Agent and
Borrower (which consent, in each case, shall not be unreasonably withheld) at
any time assign to one or more banks or other financial institutions which are
not affiliates of, or otherwise related in any way to, Borrower (each an
"Assignee") all or a portion of its rights and obligations under this Agreement
and the Notes; provided, however, (i)(x) no such consent by Borrower or Agent
shall be required in the case of any assignment to any affiliate of such Lender
and (y) no such consent by Borrower shall be required if a Default or Event of
Default shall have occurred and be continuing; (ii) any partial assignment shall
be in an amount at least equal to $10,000,000 and after giving effect to such
assignment the assigning Lender retains a Commitment, or if the Commitments have
been terminated, holds Notes having an aggregate outstanding principal balance,
of at least $10,000,000; (iii) each such assignment shall be effected by means
of an Assignment and Acceptance Agreement and (iv) such Assignee must be a bank
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<PAGE>
or other financial institution whose senior unsecured debt obligations (or whose
parent's senior unsecured debt obligations) are rated not less than investment
grade or its equivalent by Moody's Investor Service, Inc. or Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc. and which has total assets in
excess of $10,000,000,000. Upon execution and delivery of such instrument and
payment by such Assignee to such transferor Lender of an amount equal to the
purchase price agreed between such transferor Lender and such Assignee, such
Assignee shall be deemed to be a Lender party to this Agreement and shall have
all the rights and obligations of a Lender with a Commitment as set forth in
such Assignment and Acceptance Agreement, and the transferor Lender shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection, the transferor Lender, Agent and
Borrower shall make appropriate arrangements so that new Notes are issued to the
Assignee and such transferor Lender, as appropriate. In connection with any such
assignment, the transferor Lender shall pay to Agent an administrative fee for
processing such assignment in the amount of $3,000.
11.8.4. In addition to the assignments and participations permitted
under the foregoing provisions of this Section, any Lender may assign and pledge
all or any portion of its Loans and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank, and such Loans and Notes shall be fully
transferable as provided therein. No such assignment shall release the assigning
Lender from its obligations hereunder.
11.8.5. Subject to the provisions of Section 7.6, a Lender may furnish
any information concerning Borrower or any of its Subsidiaries in the possession
of such Lender from time to time to Assignees and Participants (including
prospective Assignees and Participants).
11.8.6. Anything in this Section to the contrary notwithstanding, no
Lender may assign or participate any interest in any Loan held by it hereunder
to Borrower or any of its affiliates or Subsidiaries.
SECTION 11.9. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF TEXAS.
SECTION 11.10. Litigation.
11.10.1. EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY
BETWEEN OR AMONG BORROWER, AGENT, ISSUING BANK OR ANY OF LENDERS WOULD BE BASED
ON DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT AND THAT A TRIAL BY JURY COULD
RESULT IN SIGNIFICANT DELAY AND EXPENSE. ACCORDINGLY, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF LENDERS, ISSUING BANK, AGENT AND BORROWER
HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN
ANY COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST BORROWER
ARISING OUT OF THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT OR BY REASON
OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN OR AMONG BORROWER, AGENT OR ANY
OF LENDERS OF ANY KIND OR NATURE.
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<PAGE>
11.10.2. BORROWER, AGENT, ISSUING BANK, AND EACH LENDER EACH HEREBY
AGREES THAT THE FEDERAL DISTRICT COURT OF THE SOUTHERN DISTRICT OF TEXAS OR, AT
THE OPTION OF AGENT, ANY STATE COURT LOCATED IN HARRIS COUNTY, TEXAS SHALL HAVE
NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
OR AMONG BORROWER, AGENT, ISSUING BANK, OR ANY OF LENDERS, PERTAINING DIRECTLY
OR INDIRECTLY TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT OR TO ANY
MATTER ARISING HEREFROM OR THEREFROM. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH
COURTS. THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO
PRECLUDE THE BRINGING OF ANY ACTION BY AGENT, ISSUING BANK, OR ANY LENDER OR THE
ENFORCEMENT BY AGENT, ISSUING BANK, OR ANY LENDER OF ANY JUDGMENT OBTAINED IN
SUCH FORUM IN ANY OTHER APPROPRIATE JURISDICTION. FURTHER, BORROWER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH
IT 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.
11.10.3. THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF
COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF, AND
SHALL SURVIVE THE PAYMENT OF THE LOANS AND ALL OTHER AMOUNTS PAYABLE HEREUNDER
OR UNDER THE OTHER LOAN DOCUMENTS AND THE TERMINATION OF THIS AGREEMENT.
SECTION 11.11. Counterparts; Integration.
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. This Agreement, together with the
other Loan Documents, constitutes the entire agreement and understanding among
the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 11.12. Invalid Provisions.
Any provision of this Agreement or any other Loan Document held by a
court of competent jurisdiction to be illegal, invalid or unenforceable shall
not invalidate the remaining provisions of such Loan Document which shall remain
in full force and effect and the effect thereof shall be confined to the
provision held invalid or illegal.
70
<PAGE>
SECTION 11.13. Limitation of Liability of Trustees, Etc.
AGENT AND LENDERS SHALL LOOK SOLELY TO BORROWER FOR THE ENFORCEMENT OF
ANY CLAIM AGAINST BORROWER AND ACCORDINGLY NEITHER THE TRUST MANAGERS, OFFICERS,
EMPLOYEES, SHAREHOLDERS OF BORROWER NOR THE INVESTMENT MANAGER OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES OR SHAREHOLDERS SHALL HAVE ANY PERSONAL LIABILITY
FOR OBLIGATIONS ENTERED INTO BY OR ON BEHALF OF BORROWER.
SIGNATURE PAGES TO FOLLOW
71
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
BORROWER:
AmREIT, Inc.
By: /S/ H. Kerr Taylor
Name: H. Kerr Taylor
Title: President
[Signatures Continued on Next Page]
72
<PAGE>
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Agent,
Issuing Bank and in its individual capacity as Lender
By: /s/ David C. Williams
Name: David C. Williams
Title: Vice President
Lending Office (all Types of Loans):
Disbursement and Operations Center
2120 East Park Place, Suite 100
El Segundo, California 90245
Attention: David Cannon
with a copy to:
1000 Louisiana, 4th Floor
Houston, Texas 77002-5093
Attention: David C. Williams
Telecopier: (713) 319-1415
Telephone: (713) 739-1077
Commitment Amount:
$30,000,000.00
73
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT dated as of __________, 199_
(the "Agreement") by and among __________________________ (the "Assignor"),
___________________________ (the "Assignee"), AmREIT, Inc., a Maryland
corporation (the "Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Agent (the "Agent").
WHEREAS, the Assignor is a Lender under that certain Revolving Credit
Agreement dated as of November 6, 1998 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), by and among the
Borrower, the financial institutions party thereto and their assignees under
Section 11.8 thereof, and the Agent;
WHEREAS, the Assignor desires to assign to the Assignee all or a
portion of the Assignor's Commitment under the Credit Agreement, all on the
terms and conditions set forth herein; and
WHEREAS, the Borrower and the Agent consent to such assignment on the
terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged by the parties hereto, the parties
hereto hereby agree as follows.
Section 1. Assignment.
1. Subject to the terms and conditions of this Agreement and in consideration of
the payment to be made by the Assignee to the Assignor pursuant to Section 2 of
this Agreement, effective as of ______________, 199___ (the "Assignment Date")
the Assignor hereby irrevocably sells, transfers and assigns to the Assignee, ]
without recourse, a $_____________ interest (such interest being the "Assigned
Commitment") in and to the Assignor's Commitment and all of the other rights and
obligations of the Assignor under the Credit Agreement, such Assignor's Note and
the other Loan Documents representing ___% in respect of the aggregate amount of
all Lender's Commitments, including without limitation, a principal amount of
outstanding Loans equal to $_____________, all voting rights of the Assignor
associated with the Assigned Commitment, all rights to receive interest on such
amount of Loans and all commitment and other fees with respect to the Assigned
Commitment and other rights of the Assignor under the Credit Agreement and the
other Loan Documents with respect to the Assigned Commitment, all as if the
Assignee were an original Lender under and signatory to the Credit Agreement
having a Commitment equal to such amount of the Assigned Commitment. The
Assignee, subject to the terms and conditions hereof, hereby assumes all
obligations of the Assignor with respect to the Assigned Commitment as if the
Assignee were an original Lender under and signatory to the Credit Agreement
having a Commitment equal to the Assigned Commitment, which obligations shall
include, but shall not be limited to, the obligation of the Assignor to make
Revolving Loans to the Borrower with respect to the Assigned Commitment, the
obligation to pay the Issuing Bank amounts due in respect of drawings under
Letters of Credit as required under Section 2.13(g) of the Credit Agreement and
Form of Assignment and Acceptance Agreement
Exhibit A
Page A-1
<PAGE>
the obligation to indemnify the Agent as provided therein (the foregoing
enumerated obligations, together with all other similar obligations more
particularly set forth in the Credit Agreement and the other Loan Documents,
shall be referred to hereinafter, collectively, as the "Assigned Obligations").
The Assignor shall have no further duties or obligations with respect to, and
shall have no further interest in, the Assigned Obligations or the Assigned
Commitment.
2. The assignment by the Assignor to the Assignee hereunder is without recourse
to the Assignor. The Assignee makes and confirms to the Agent, the Assignor, and
the other Lenders all of the representations, warranties and covenants of a
Lender under Article X of the Credit Agreement. Not in limitation of the
foregoing, the Assignee acknowledges and agrees that, except as set forth in
Section 4 below, the Assignor is making no representations or warranties with
respect to, and the Assignee hereby releases and discharges the Assignor for any
responsibility or liability for (i) the present or future solvency or financial
condition of the Borrower, (ii) any representations warranties, statements or
information made or furnished by the Borrower in connection with the Credit
Agreement or otherwise, (iii) the validity, efficacy, sufficiency, or
enforceability of the Credit Agreement, any Loan Document or any other document
or instrument executed in connection therewith, or the collectibility of the
Assigned Obligations, (iv) the perfection, priority or validity of any Lien with
respect to any Collateral at any time securing the Obligations or the Assigned
Obligations under the Notes or the Credit Agreement and (v) the performance or
failure to perform by the Borrower of any obligation under the Credit Agreement
or any document or instrument executed in connection therewith. Further, the
Assignee acknowledges that it has, independently and without reliance upon the
Agent, or on any affiliate or subsidiary thereof, or any other Lender and based
on the financial statements supplied by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to become a Lender under the Credit Agreement. The Assignee also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement or any Note or pursuant to any
other obligation. The Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide the Assignee with any credit or
other information with respect to the Borrower or to notify the undersigned of
any Event of Default except as expressly provided in the Credit Agreement. The
Assignee has not relied on the Agent as to any legal or factual matter in
connection therewith or in connection with the transactions contemplated
thereunder.
Section 2. Payment by Assignee. In consideration of the assignment
made pursuant to Section 1 of this Agreement, the Assignee agrees to pay to the
Assignor on the Assignment Date an amount equal to $_______________ representing
the aggregate principal amount outstanding of the Loans owing to the Assignor
under the Credit Agreement and the other Loan Documents and being assigned
hereby.
Section 3. Payments by Assignor. The Assignor agrees to pay to the
Agent on the Assignment Date an administration fee of $3,000.
Form of Assignment and Acceptance Agreement
Exhibit A
Page A-2
<PAGE>
Section 4. Representations and Warranties of Assignor. The Assignor
hereby represents and warrants to the Assignee that (a) as of the Assignment
Date (i) the Assignor is a Lender under the Credit Agreement having a Commitment
under the Credit Agreement immediately prior to the Assignment Date, equal to
$________________ and that the Assignor is not in default of its obligations
under the Credit Agreement; and (ii) the outstanding principal balance of Loans
owing to the Assignor (without reduction by any assignments thereof which have
not yet become effective) is $_________ , and (b) it is the legal and beneficial
owner of the Assigned Commitment which is free and clear of any adverse claim
created by the Assignor.
Section 5. Representations, Warranties and Agreements of Assignee. The
Assignee (a) represents and warrants that it is legally authorized to enter into
this Agreement; (b) confirms that it is an "Accredited Investor" (as such term
is used in Regulation D promulgated under the Securities Act of 1933, as
amended); (c) confirms that it has received a copy of the Credit Agreement,
together with copies of the most recent financial statements delivered pursuant
thereto and such other documents and information (including without limitation
the Loan Documents) as it has deemed appropriate to make its own credit analysis
and decision to enter into this Agreement; (d) appoints and authorizes the Agent
to take such action as Agent on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Agent by the terms thereof together with
such powers as are reasonably incidental thereto; and (e) agrees that it will
become a party to and shall be bound by the Credit Agreement, the other Loan
Documents to which the other Lenders are a party on the Assignment Date and will
perform in accordance therewith all of the obligations which are required to be
performed by it as a Lender.
Section 6. Recording and Acknowledgment by the Agent. Following the
execution of this Agreement, the Assignor will deliver to the Agent (a) a duly
executed copy of this Agreement for acknowledgment and recording by the Agent
and (b) the Assignor's Note. The Borrower agrees to exchange such Note for new
Notes as provided in Section 11.8(c) of the Credit Agreement. Upon such
acknowledgment and recording, from and after the Assignment Date, the Agent
shall make all payments in respect of the interest assigned hereby (including
payments of principal, interest, fees and other amounts) to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in payments under
the Credit Agreement for periods prior to the Assignment Date directly between
themselves. The Agent may unilaterally amend Annex I to the Credit Agreement to
reflect the assignment effected hereby.
Section 7. Agreements of the Borrower. The Borrower hereby agrees that
the Assignee shall be a Lender under the Credit Agreement having a Commitment
equal to the Assigned Commitment. The Borrower agrees that the Assignee shall
have all of the rights and remedies of a Lender under the Credit Agreement and
the other Loan Documents as if the Assignee were an original Lender under and
signatory to the Credit Agreement, including, but not limited to, the right of a
Lender to receive payments of principal and interest with respect to the
Assigned Obligations, if any, and to the Loans made by the Lenders after the
date hereof and to receive the commitment and other fees payable to the Lenders
as provided in the Credit Agreement. Further, the Assignee shall be entitled to
the indemnification provisions from the Borrower in favor of the Lenders as
Form of Assignment and Acceptance Agreement
Exhibit A
Page A-3
<PAGE>
provided in the Credit Agreement and the other Loan Documents. The Borrower
further agrees, upon the execution and delivery of this Agreement, to execute in
favor of the Assignee a promissory note in substantially the form provided for
under the Credit Agreement in an initial amount equal to the Assigned
Commitment. Further, the Borrower agrees that, upon the execution and delivery
of this Agreement, the Borrower shall owe the Assigned Obligations to the
Assignee as if the Assignee were the Lender originally making such Loans and
entering into such other obligations.
Section 8. Addresses. The Assignee specifies as its address for notices
and its Lending Office for all Loans, the offices set forth below:
Notice Address: ___________________________
___________________________
___________________________
___________________________
Telephone No.:_____________
Telecopy No.: _____________
Domestic Lending Office: ___________________________
___________________________
___________________________
___________________________
Telephone No.:_____________
Telecopy No.: _____________
LIBOR Lending Office: ___________________________
___________________________
___________________________
___________________________
Telephone No.:_____________
Telecopy No.: _____________
Section 9. Payment Instructions. All payments to be made to the
Assignee under this Agreement by the Assignor, and all payments to be made to
the Assignee under the Credit Agreement, shall be made as provided in the Credit
Agreement in accordance with the following instructions:
Section 10. Effectiveness of Assignment. This Agreement, and the
assignment and assumption contemplated herein, shall not be effective until (a)
this Agreement is executed and delivered by each of the Assignor, the Assignee,
the Borrower and the Agent and (b) the payment to the Assignor of the amounts
owing by the Assignee pursuant to Section 2 hereof and (c) the payment to the
Agent of the amounts owing by the Assignor pursuant to Section 3 hereof. Upon
recording and acknowledgment of this Agreement by the Agent, from and after the
Form of Assignment and Acceptance Agreement
Exhibit A
Page A-4
<PAGE>
Assignment Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Agreement, have the rights and obligations of a
Lender thereunder and (ii) the Assignor shall, to the extent provided in this
Agreement, relinquish its rights and be released from its obligations under the
Credit Agreement; provided, however, that if the Assignor does not assign its
entire interest under the Loan Documents, it shall remain a Lender entitled to
all of the benefits and subject to all of the obligations thereunder with
respect to its remaining Commitment.
Section 11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
Section 12. Counterparts. This Agreement may be executed in any number
of counterparts each of which, when taken together, shall constitute one and the
same agreement.
Section 13. Headings. Section headings have been inserted herein for
convenience only and shall not be construed to be a part hereof.
Section 14. Amendments; Waivers. This Agreement may not be amended,
changed, waived or modified except by a writing executed by the Assignee and the
Assignor.
Section 15. Entire Agreement. This Agreement embodies the entire
agreement between the Assignor and the Assignee with respect to the subject
matter hereof and supersedes all other prior arrangements and understandings
relating to the subject matter hereof.
Section 16. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
Section 17. Definitions. Terms not otherwise defined herein are used
herein with the respective meanings given them in the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Assignment and Acceptance Agreement as of the date and year first written above.
ASSIGNOR:
[NAME OF ASSIGNOR]
By:
Name:
Title:
ASSIGNEE:
Form of Assignment and Acceptance Agreement
Exhibit A
Page A-5
<PAGE>
[NAME OF ASSIGNEE]
By:
Name:
Title:
Agreed and Consented to as of the
date first written above:
BORROWER:
AmREIT, Inc.
By:
Name:
Title:
Accepted as of the date first written above.
AGENT:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Agent
By:
Name:
Title:
Form of Assignment and Acceptance Agreement
Exhibit A
Page A-6
<PAGE>
FORM OF GUARANTY
THIS GUARANTY dated as of November ____, 1998, executed and delivered
by each of the undersigned and the other Persons from time to time party hereto
pursuant to the execution and delivery of an Accession Agreement in the form of
Annex I hereto (all of the undersigned, together with such other Persons each a
"Guarantor" and collectively, the "Guarantors") in favor of (a) WELLS FARGO
BANK, NATIONAL ASSOCIATION, in its capacity as Agent (the "Agent") for the
Lenders under that certain Revolving Credit Agreement dated as of November 6,
1998 by and among AmREIT, Inc., a Maryland corporation, the financial
institutions party thereto and their assignees under Section 11.8 thereof (the
"Lenders"), and the Agent (as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with its terms, the "Credit
Agreement") and (b) the Lenders and the Issuing Bank.
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
extend certain financial accommodations to the Borrower;
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the extension of financial accommodations under the Credit
Agreement that the Guarantors execute and deliver this Guaranty;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each Guarantor, each Guarantor
agrees as follows:
Section 1. Guaranty. Each Guarantor hereby absolutely, irrevocably and
unconditionally guaranties the due and punctual payment and performance when
due, whether at stated maturity, by acceleration or otherwise, of all of the
following (collectively referred to as the "Guarantied Obligations"): (a) all
indebtedness and obligations owing by the Borrower to any Lender, the Issuing
Bank or the Agent under or in connection with the Credit Agreement and any other
Loan Document to which the Borrower is a party, including without limitation,
the repayment of all principal of the Revolving Loans, all Reimbursement
Obligations and all other Letter of Credit Liabilities, and the payment of all
interest, Fees, charges, reasonable and actual attorneys fees and other amounts
payable to any Lender, the Issuing Bank or the Agent thereunder or in connection
therewith; (b) any and all extensions, renewals, modifications, amendments or
substitutions of the foregoing; (c) all expenses, including, without limitation,
reasonable and actual attorneys' fees and disbursements that are incurred by the
Lenders, the Issuing Bank and the Agent in the enforcement of any of the
foregoing or any obligation of such Guarantor hereunder and (d) all other
Obligations.
Section 2. Guaranty of Payment and Not of Collection. This Guaranty is
a guaranty of payment, and not of collection, and a debt or each Guarantor for
its own account. Accordingly, the Lenders, the Issuing Bank, and the Agent shall
not be obligated or required before enforcing this Guaranty against any
Guarantor: (a) to pursue any right or remedy the Lenders, the Issuing Bank or
the Agent may have against the Borrower, any other Loan Party or any other
Person or commence any suit or other proceeding against the Borrower, any other
Form of Guaranty
Exhibit B
Page B-1
<PAGE>
Loan Party or any other Person in any court or other tribunal, (b) to make any
claim in a liquidation or bankruptcy of the Borrower, any other Loan Party or
any other Person; or (c) to make demand of the Borrower, any other Loan Party or
any other Person or to enforce or seek to enforce or realize upon any collateral
security held by the Lenders, the Issuing Bank or the Agent which may secure any
of the Guarantied Obligations.
Section 3. Guaranty Absolute. Each Guarantor guarantees that the
Guarantied Obligations will be paid strictly in accordance with the terms of the
documents evidencing the same, regardless of any Applicable Law now or hereafter
in effect in any jurisdiction affecting any of such terms or the rights of the
Agent, the Lenders or the Issuing Bank with respect thereto. The liability of
each Guarantor under this Guaranty shall be absolute and unconditional in
accordance with its terms and shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever, including
without limitation, the following (whether or not such Guarantor consents
thereto or has notice thereof):
(a) (i) any change in the amount, interest rate or due date or other
term of any of the Guarantied Obligations, (ii) any change in the time, place or
manner of payment of all or any portion of the Guarantied Obligations, (iii) any
amendment or waiver of, or consent to the departure from or other indulgence
with respect to, the Credit Agreement, any other Loan Document, or any other
document or instrument evidencing or relating to any Guarantied Obligations, or
(iv) any waiver, renewal, extension, addition, or supplement to, or deletion
from, or any other action or inaction under or in respect of, the Credit
Agreement, any of the other Loan Documents, or any other documents, instruments
or agreements relating to the Guarantied Obligations or any other instrument or
agreement referred to therein or evidencing any Guarantied Obligations or any
assignment or transfer of any of the foregoing;
(b) any lack of validity or enforceability of the Credit Agreement, any
of the other Loan Documents, or any other document, instrument or agreement
referred to therein or evidencing any Guarantied Obligations or any assignment
or transfer of any of the foregoing;
(c) any furnishing to the Agent, the Lenders or the Issuing Bank of any
additional security for the Guarantied Obligations, or any sale, exchange,
release or surrender of, or realization on, any collateral securing any of the
Obligations;
(d) any settlement or compromise of any of the Guarantied Obligations,
any security therefor, or any liability of any other party with respect to the
Guarantied Obligations, or any subordination of the payment of the Guarantied
Obligations to the payment of any other liability of the Borrower or any other
Loan Party,
(e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to such
Guarantor, the Borrower, any other Loan Party or any other Person, or any action
taken with respect to this Guaranty by any trustee or receiver, or by any court,
in any such proceeding;
Form of Guaranty
Exhibit B
Page B-2
<PAGE>
(f) any act or failure to act by the Borrower, any other Loan Party or
any other Person which may adversely affect such Guarantor's subrogation rights,
if any, against the Borrower to recover payments made under this Guaranty;
(g) any application of sums paid by the Borrower, any other Loan Party
or any other Person with respect to the liabilities of the Borrower to the
Agent, the Lenders, or the Issuing Bank, regardless of what liabilities of the
Borrower remain unpaid;
(h) any defect, limitation or insufficiency in the borrowing powers of
the Borrower or in the exercise thereof; or
(i) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, such Guarantor hereunder
Section 4. Action with Respect to Guarantied Obligations. The Lenders,
the Issuing Bank and the Agent may, at any time and from time to time, without
the consent of, or notice to, any Guarantor, and without discharging any
Guarantor from its obligations hereunder take any and all actions described in
Section 3 and may otherwise: (a) amend, modify, alter or supplement the terms of
any of the Guarantied Obligations, including, but not limited to, extending or
shortening the time of payment of any of the Guarantied Obligations or the
interest rate that may accrue on any of the Guarantied Obligations; (b) amend,
modify, alter or supplement the Credit Agreement or any other Loan Document; (c)
sell, exchange, release or otherwise deal with all, or any part, of any
collateral securing any of the Obligations; (d) release any Loan Party or other
Person liable in any manner for the payment or collection of the Guarantied
Obligations; (e) exercise, or refrain from exercising, any rights against the
Borrower, any other Loan Party or any other Person; and (f) apply any sum, by
whomsoever paid or however realized, to the Guarantied Obligations in such order
as the Lenders shall elect.
Section 5. Representations and Warranties. Each Guarantor hereby makes
to the Agent and the Lenders all of the representations and warranties made by
the Borrower with respect to or in any way relating to such Guarantor in the
Credit Agreement and the other Loan Documents, as if the same were set forth
herein in full.
Section 6. Covenants. Each Guarantor will comply with all covenants
which the Borrower is to cause such Guarantor to comply with under the terms of
the Credit Agreement or any of the other Loan Documents.
Section 7. Waiver. Each Guarantor, to the fullest extent permitted by
Applicable Law, hereby waives notice or acceptance hereof or any presentment,
demand, protest or notice or any kind, and any other act or thing, or omission
or delay to do any other act or thing, which in any manner or to any extent
might vary the risk of such Guarantor or which otherwise might operate to
discharge such Guarantor from its obligations hereunder.
Form of Guaranty
Exhibit B
Page B-3
<PAGE>
Section 8. Inability to Accelerate Loan. If the Agent, the Lenders or
the Issuing Bank are prevented from demanding or accelerating payment of any of
the Guarantied Obligations by reason of any automatic stay or otherwise, the
Agent, the Lenders or the Issuing Bank shall be entitled to receive from such
Guarantor, upon demand therefor, the sums which otherwise would have been due
had such demand or acceleration occurred.
Section 9. Reinstatement of Guarantied Obligations. If claim is ever
made on the Agent, any Lender or the Issuing Bank for repayment or recovery of
any amount or amounts received in payment or on account of any of the Guarantied
Obligations, and the Agent or such Lender repays all or part of said amount by
reason of (a) any judgment, decree or order of any court or administrative body
of competent jurisdiction, or (b) any settlement or compromise of any such claim
effected by the Agent, the Lender or the Issuing Bank with any such claimant
(including the Borrower or a trustee in bankruptcy for the Borrower), then and
in such event each Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding on it, notwithstanding any revocation
hereof or the cancellation of the Credit Agreement, any of the other Loan
Documents, or any other instrument evidencing any liability of the Borrower, and
such Guarantor shall be and remain liable to the Agent, such Lender or the
Issuing Bank for the amounts so repaid or recovered to the same extent as if
such amount had never originally been paid to the Agent, such Lender or the
Issuing Bank.
Section 10. Subrogation. Upon the making by any Guarantor of any
payment hereunder for the account or the Borrower, such Guarantor shall be
subrogated to the rights of the payee against the Borrower; provided, however,
that such Guarantor shall not enforce any right or receive any payment by way of
subrogation or otherwise take any action in respect of any other claim or cause
of action such Guarantor may have against the Borrower arising by reason of any
payment or performance by such Guarantor pursuant to this Guaranty, unless and
until all of the Guarantied Obligations have been indefeasibly paid and
performed in fill. If any amount shall be paid to such Guarantor on account of
or in respect of such subrogation rights or other claims or causes of action,
such Guarantor shall hold such amount in trust for the benefit of the Agent, the
Lenders and the Issuing Bank and shall forthwith pay such amount to the Agent to
be credited and applied against the Guarantied Obligations, whether matured or
unmatured, in accordance with the terms of the Credit Agreement or to be held by
the Agent as collateral security for any Guarantied Obligations existing.
Section 11. Payments Free and Clear. All sums payable by each Guarantor
hereunder, whether of principal, interest, Fees, expenses, premiums or
otherwise, shall be paid in full, without set-off or counterclaim or any
deduction or withholding whatsoever (including any withholding tax or liability
imposed by any Governmental Authority, or any Applicable Law promulgated
thereby), and if such Guarantor is required by Applicable Law or by any
Governmental Authority to make any such deduction or withholding, such Guarantor
shall pay to the Agent, the Lenders and the Issuing Bank such additional amount
as will result in the receipt by the Agent, the Lenders and the Issuing Bank of
the full amount payable hereunder had such deduction or withholding not occurred
or been required.
Form of Guaranty
Exhibit B
Page B-4
<PAGE>
Section 12. Subordination. Each Guarantor hereby expressly covenants
and agrees for the benefit of the Agent, the Lenders and the Issuing Bank that
all obligations and liabilities of the Borrower to such Guarantor of whatever
description, including without limitation, all intercompany receivables of such
Guarantor from the Borrower (collectively, the "Junior Claims") shall be
subordinate and junior in right of payment to all Guarantied Obligations. If an
Event of Default shall have occurred and be continuing, then no Guarantor shall
accept any direct or indirect payment (in cash, property, securities by set-off
or otherwise) from the Borrower on account of or in any manner in respect of any
Junior Claim until all of the Guarantied Obligations have been indefeasibly paid
in full.
Section 13. Avoidance Provisions. It is the intent of each Guarantor,
the Agent, the Lenders and the Issuing Bank that in any Proceeding, such
Guarantor's maximum obligation hereunder shall equal, but not exceed, the
maximum amount which would not otherwise cause the obligations of the Guarantor
hereunder (or any other obligations of the Guarantor to the Agent, the Lenders
and the Issuing Bank) to be avoidable or unenforceable against the Guarantor in
such Proceeding as a result of Applicable Law, including, without limitation,
(a) Section 548 of the Bankruptcy Code of 1978, as amended (the "Bankruptcy
Code") and (b) any state fraudulent transfer or fraudulent conveyance act or
statue applied in such Proceeding, whether by virtue of Section 544 of the
Bankruptcy Code or otherwise. The Applicable Laws under which the possible
avoidance or unenforceability of the obligations of such Guarantor hereunder (or
any other obligations of such Guarantor to the Agent, the Lenders and the
Issuing Bank) shall be determined in any such Proceeding are referred to as the
"Avoidance Provisions". Accordingly, to the extent that the obligations of any
Guarantor hereunder would otherwise be subject to avoidance under the Avoidance
Provisions, the maximum Guarantied Obligations for which such Guarantor shall be
liable hereunder shall be reduced to that amount which, as of the time any of
the Guarantied Obligations are deemed to have been incurred under the Avoidance
Provisions, would not cause the obligations of any Guarantor hereunder (or any
other obligations of the Guarantor to the Agent, the Lenders and the Issuing
Bank), to be subject to avoidance under the Avoidance Provisions. This Section
is intended solely to preserve the rights of the Agent, the Lenders and the
Issuing Bank hereunder to the maximum extent that would not cause the
obligations of any Guarantor hereunder to be subject to avoidance under the
Avoidance Provisions, and no Guarantor or any other Person shall have any right
or claim under this Section as against the Agent, the Lenders and the Issuing
Bank that would not otherwise be available to such Person under the Avoidance
Provisions.
Section 14. Information. Each Guarantor assumes all responsibility for
being and keeping itself informed of the financial condition of the Borrower and
the other Loan Parties, and of all other circumstances bearing upon the risk of
nonpayment of any of the Guarantied Obligations and the nature, scope and extent
of the risks that such Guarantor assumes and incurs hereunder, and agrees that
none of the Agent, any Lender or the Issuing Bank shall have any duty whatsoever
to advise any Guarantor of information regarding such circumstances or risks.
Section 15. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
Form of Guaranty
Exhibit B
Page B-5
<PAGE>
SECTION 16. WAIVER OF JURY TRIAL. (a) EACH GUARANTOR, AND EACH OF THE
AGENT, THE LENDERS AND THE ISSUING BANK BY ACCEPTING THE BENEFITS HEREOF,
ACKNOWLEDGE THAT ANY DISPUTE OR CONTROVERSY BETWEEN OR AMONG ANY GUARANTOR, THE
AGENT, ANY LENDER AND THE ISSUING BANK WOULD BE BASED ON DIFFICULT AND COMPLEX
ISSUES OF LAW AND FACT AND THAT A TRIAL BY JURY COULD RESULT IN SIGNIFICANT
DELAY AND EXPENSE. ACCORDINGLY, THE GUARANTOR, AND EACH OF THE AGENT, THE
LENDERS AND THE ISSUING BANK BY ACCEPTING THE BENEFITS HEREOF, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR TRIBUNAL IN WHICH AN ACTION MAY
BE COMMENCED BY OR AGAINST SUCH GUARANTOR ARISING OUT OF THIS GUARANTY OR ANY
OTHER LOAN DOCUMENT OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER
BETWEEN OR AMONG SUCH GUARANTOR, THE AGENT, ANY LENDER OR THE ISSUING BANK OF
ANY KIND OR NATURE.
(b) THE GUARANTOR, AGENT, EACH LENDER OR THE ISSUING BANK EACH HEREBY
AGREES THAT THE FEDERAL DISTRICT COURT OF THE SOUTHERN DISTRICT OF TEXAS OR, AT
THE OPTION OF AGENT, ANY STATE COURT LOCATED IN HARRIS COUNTY, TEXAS SHALL HAVE
NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
OR AMONG GUARANTOR, AGENT, ANY THE LENDERS OR THE ISSUING BANK, PERTAINING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT
OR TO ANY MATTER ARISING HEREFROM OR THEREFROM. GUARANTOR EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED
IN SUCH COURTS. THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE
DEEMED TO PRECLUDE THE BRINGING OF ANY ACTION BY AGENT, ANY LENDER OR THE
ISSUING BANK OR THE ENFORCEMENT BY AGENT, ANY LENDER OR THE ISSUING BANK OF ANY
JUDGMENT OBTAINED IN SUCH FORUM IN ANY OTHER APPROPRIATE JURISDICTION. FURTHER,
EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY OBJECTION WHICH IT 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
(c) THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF COUNSEL AND
WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF, AND SHALL SURVIVE
THE PAYMENT OF THE OBLIGATIONS AND ALL OTHER AMOUNTS PAYABLE HEREUNDER OR UNDER
THE OTHER LOAN DOCUMENTS AND THE TERMINATION OF THIS GUARANTY.
Form of Guaranty
Exhibit B
Page B-6
<PAGE>
Section 17. Loan Accounts . The Agent, each Lender and the Issuing Bank
may maintain books and accounts setting forth the amounts of principal, interest
and other sums paid and payable with respect to the Guarantied Obligations, and
in the case of any dispute relating to any of the outstanding amount, payment or
receipt of any of the Guarantied Obligations or otherwise, the entries in such
books and accounts shall constitute prima facie evidence of the outstanding
amount of such Guarantied Obligations and the amounts paid and payable with
respect thereto. The failure of the Agent, any Lender or the Issuing Bank to
maintain such books and accounts shall not in any way relieve or discharge any
Guarantor of any of its obligations hereunder.
Section 18. Waiver of Remedies. No delay or failure on the part of the
Agent, any Lender or the Issuing Bank in the exercise of any right or remedy it
may have against any Guarantor hereunder or otherwise shall operate as a waiver
thereof, and no single or partial exercise by the Agent, any Lender or the
Issuing Bank of any such right or remedy shall preclude other or further
exercise thereof or the exercise of any other such right or remedy.
Section 19. Termination. This Guaranty shall remain in full force and
effect until indefeasible payment in full of the Obligations and the termination
or cancellation of the Credit Agreement.
Section 20. Successors and Assigns. Each reference herein to the Agent,
the Lenders or the Issuing Bank shall be deemed to include such Person's
respective successors and assigns (including, but not limited to, any holder of
the Guarantied Obligations) in whose favor the provisions of this Guaranty also
shall inure, and each reference herein to each Guarantor shall be deemed to
include such Guarantor's successors and assigns, upon whom this Guaranty also
shall be binding. The Lenders and the Issuing Bank may, in accordance with the
applicable provisions of the Credit Agreement, assign, transfer or sell any
Guarantied Obligations, or grant or sell participation in any Guarantied
Obligations, to any Person without the consent of, or notice to, any Guarantor
and without releasing, discharging or modifying any Guarantor's obligations
hereunder. Each Guarantor hereby consents to the delivery by the Agent, Lenders
or the Issuing Bank to any Assignee or Participant (or any prospective Assignee
or Participant) of any financial or other information regarding the Borrower or
any Guarantor. No Guarantor may assign or transfer its obligations hereunder to
any Person.
Section 21. JOINT AND SEVERAL OBLIGATIONS. THE OBLIGATIONS OF THE
GUARANTOR HEREUNDER SHALL BE JOINT AND SEVERAL AND ACCORDINGLY, EACH GUARANTOR
CONFIRMS THAT IT IS LIABLE FOR THE FULL AMOUNT OF THE "GUARANTEED OBLIGATIONS"
AND ALL OF THE OBLIGATIONS AND LIABILITIES OF EACH OF THE OTHER GUARANTORS
HEREUNDER.
Section 22. Amendments. This Guaranty may not be amended except in
writing signed by the Agent and each Guarantor.
Form of Guaranty
Exhibit B
Page B-7
<PAGE>
Section 23. Payments. All payments to be made by any Guarantor pursuant
to this Guaranty shall be made in Dollars, in immediately available funds to the
Agent at its Lending Office, not later than 11:00 a.m., on the date one Business
Day after demand therefor.
Section 24. Notices. All notices, requests and other communications
hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given (a) to each Guarantor at its address set forth below
its signature hereto, (b) to the Agent, Lender or the Issuing Bank at its
address for notices provided for in the Credit Agreement, or (c) as to each such
party at such other address as such party shall designate in a written notice to
the other parties. Each such notice, request or other communication shall be
effective (i) if mailed, when received; (ii) if telecopied, when transmitted; or
(iii) if hand delivered, when delivered; provided, however, that any notice of a
change of address for notices shall not be effective until received.
Section 25. Severability. In case any provision of this Guaranty shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 26. Headings. Section headings used in this Guaranty are for
convenience only and shall not affect the construction of this Guaranty.
Section 27. Definitions. (a) For the purposes of this Guaranty:
"Proceeding" means any of the following: (i) a voluntary or involuntary
case concerning any Guarantor shall be commenced under the Bankruptcy Code of
1978, as amended; (ii) a custodian (as defined in such Bankruptcy Code or any
other applicable bankruptcy laws) is appointed for, or takes charge of, all or
any substantial part of the property of any Guarantor; (iii) any other
proceeding under any Applicable Law, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding-up or composition for adjustment
of debts, whether now or hereafter in effect, is commenced relating to any
Guarantor; (iv) any Guarantor is adjudicated insolvent or bankrupt; (v) any
order of relief or other order approving any such case or proceeding is entered
by a court of competent jurisdiction; (vi) any Guarantor makes a general
assignment for the benefit of creditors; (vii) any Guarantor shall fail to pay,
or shall state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; (viii) any Guarantor shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts;
(ix) any Guarantor shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing; or (x) any corporate action
shall be taken by any Guarantor for the purpose of effecting any of the
foregoing.
(b) Terms not otherwise defined herein are used herein with the
respective meanings given them in the Credit Agreement.
Section 28. YEAR 2000. Guarantor shall ensure that the following are
Year 2000 Compliant in a timely manner, but in no event later than December 31,
1999: (a) each Property; (b) Guarantor itself; and (c) any other major
commercial properties and entities in which Guarantor holds a controlling
Form of Guaranty
Exhibit B
Page B-8
<PAGE>
interest. Guarantor shall further make reasonable inquiries of and request
reasonable validation that each of the following are similarly Year 2000
Compliant: (x) all "major" tenants or other entities from which Guarantor
receives payments; and (y) all "major" contractors, suppliers, service providers
and vendors of Guarantor. As used in this paragraph, "major" shall mean
properties or entities the failure of which to be Year 2000 Compliant would have
a material adverse economic impact upon Guarantor. The term "Year 2000
Compliant" shall mean, in regard to any property or entity, that all software,
hardware, equipment, goods or systems utilized by or material to the physical
operations, business operations, or financial reporting of such property or
entity (collectively, the "systems") will properly perform date sensitive
functions before, during and after the year 2000. In furtherance of this
covenant, Guarantor shall, in addition to any other necessary actions perform a
comprehensive review and assessment of all systems of Guarantor and each
Property, and shall adopt a detailed plan, with itemized budget, for the
testing, remediation, and monitoring of such systems. Guarantor shall, within
thirty business days of Lender's written request, provide to Lender such
certifications or other evidence of Guarantor's compliance with the terms of
this paragraph as Lender may from time to time reasonably require.
[Signatures on Next Page]
Form of Guaranty
Exhibit B
Page B-9
<PAGE>
IN WITNESS WHEREOF, each Guarantor has duly executed and delivered this
Guaranty as of the date and year first written above.
[GUARANTOR]
By:
Name:
Title:
Address for Notices:
_________________________________________
_________________________________________
_________________________________________
Attention:
Telecopier: (___)
Telephone: (___)
Form of Guaranty
Exhibit B
Page B-10
<PAGE>
ANNEX I
FORM OF ACCESSION AGREEMENT
THIS ACCESSION AGREEMENT dated as of _________, 19__, executed and
delivered by ________________, a (the "New Guarantor") in favor of (a) WELLS
FARGO BANK, NATIONAL ASSOCIATION, in its capacity as Agent (the "Agent") for the
Lenders under that certain Revolving Credit Agreement dated as of November 6,
1998 (as the same may be amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms, the "Credit Agreement"), by and
among AmREIT, Inc. (the "Borrower"), the financial institutions initially party
thereto and their assignees under Section 11.8 thereof (the "Lenders"), and the
Agent and (b) the Lenders and the Issuing Bank.
WHEREAS, pursuant to the Credit Agreement, the Agent, the Lenders and
the Issuing Bank have agreed to make available to the Borrower certain financial
accommodations on the terms and conditions set forth in the Credit Agreement;
WHEREAS, the Borrower owns, directly or indirectly, ___% of the issued
and outstanding capital stock of; or other equity interest in, the New
Guarantor;
WHEREAS, the Borrower, the New Guarantor and the other Subsidiaries of
the Borrower though separate legal entities, are mutually dependent on each
other in the conduct of their respective businesses as an integrated operation
and have determined it to be in their mutual best interests to obtain financing
from the Agent, the Lenders and the Issuing Bank through their collective
efforts:
WHEREAS, the New Guarantor acknowledges that it will receive direct and
indirect benefits from the Agent, the Lenders and the Issuing Bank making such
financial accommodations available to the Borrower under the Credit Agreement
and, accordingly, the New Guarantor is willing to guarantee the Borrower's
obligations to the Agent, the Lenders and the Issuing Bank on the terms and
conditions contained herein, and
WHEREAS, the New Guarantor's execution and delivery of this Agreement
is a condition to the Agent, the Lenders and the Issuing Bank continuing to make
such financial accommodations to the Borrower.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the New Guarantor, the New
Guarantor agrees as follows:
Section 1. Accession to Guaranty. The New Guarantor hereby agrees that
it is a "Guarantor" under that certain Guaranty dated as of November ____, 1998
(the "Guaranty"), made by each Subsidiary a party thereto in favor of the Agent,
the Lenders and the Issuing Bank and assumes all obligations of a "Guarantor"
thereunder, all as if the New Guarantor had been an original signatory to the
Guaranty. Without limiting the generality of the foregoing, the New Guarantor
hereby:
Form of Guaranty
Exhibit B
Page B-11
<PAGE>
(a) irrevocably and unconditionally guarantees the due and punctual
payment and performance when due, whether at stated maturity, by acceleration or
otherwise, of all Guarantied Obligations;
(b) makes to the Agent, the Lenders and the Issuing Bank as of the date
hereof each of the representations and warranties contained in Section 5 of the
Guaranty and agrees to be bound by each of the covenants contained in Section 6
of the Guaranty; and
(c) consents and agrees to each provision set forth in the Guaranty.
SECTION 2. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
Section 3. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have their respective defined meanings given them
in the Credit Agreement.
[Signatures on Next Page]
Form of Guaranty
Exhibit B
Page B-12
<PAGE>
IN WITNESS WHEREOF, the new Guarantor has caused this Accession
Agreement to be duly executed and delivered under seal by its duly authorized
officers as of the date first written above.
[NEW GUARANTOR]
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
(CORPORATE SEAL)
Address for Notices:
___________________________________
___________________________________
___________________________________
Attention:
Telecopier: (___)
Telephone: (___)
Accepted:
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Agent
By:
Name:
Title:
Form of Guaranty
Exhibit B
Page B-13
<PAGE>
FORM OF NOTE
$30,000,000.00 Houston, Texas November 6, 1998
FOR VALUE RECEIVED, the undersigned, AmREIT, Inc., a Maryland
corporation (the "Borrower"), hereby unconditionally promises to pay to the
order of Wells Fargo Bank, National Association (the "Lender"), in care of Wells
Fargo Bank, National Association, as Agent (the "Agent"), to Wells Fargo Bank,
National Association, Disbursement and Operations Center, 2120 East Park Place,
Suite 100, El Segundo, California 90245 or at such other address as may be
specified by the Agent to the Borrower, the principal sum of THIRTY MILLION AND
NO/100 DOLLARS ($30,000,000.00), or such lesser amount as may be such Lender's
Pro Rata Share of the then outstanding and unpaid balance of all Revolving Loans
made by the Lenders to the Borrower pursuant to, and in accordance with the
terms of, the Credit Agreement.
The Borrower further agrees to pay interest at said office, in like
money, on the unpaid principal amount owing hereunder from time to time on the
dates and at the rates and at the times specified in the Credit Agreement.
This Note is one of the "Revolving Notes" referred to in that certain
Revolving Credit Agreement dated as of November 6, 1998 (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
by and among the Borrower, the financial institutions party thereto and their
assignees under Section 11.8 thereof (the "Lenders"), and the Agent, and is
subject to, and entitled to, all provisions and benefits thereof. Capitalized
terms used herein and not defined herein shall have the respective meanings
given to such terms in the Credit Agreement. The Credit Agreement, among other
things, (a) provides for the making of Revolving Loans by the Lender to the
Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the Dollar amount first above mentioned, (b) permits the prepayment
of the Loans by the Borrower subject to certain terms and conditions and (c)
provides for the acceleration of the Revolving Loans upon the occurrence of
certain specified events.
It is expressly stipulated and agreed to be the intent of Borrower and
Lenders at all times to comply strictly with the applicable Texas law governing
the maximum rate or amount of interest payable on this Note or the Related
Indebtedness (or applicable United States federal law to the extent that it
permits Lenders to contract for, charge, take, reserve or receive a greater
amount of interest than under Texas law). If the applicable law is ever
judicially interpreted so as to render usurious any amount (i) contracted for,
charged, taken, reserved or received pursuant to this Note, any of the other
Loan Documents or any other communication or writing by or between Borrower and
Lenders related to the transaction or transactions that are the subject matter
of the Loan Documents, (ii) contracted for, charged or received by reason of
Lenders' exercise of the option to accelerate the maturity of this Note and/or
the Related Indebtedness, or (iii) Borrower will have paid or Lenders will have
received by reason of any voluntary prepayment by Borrower of this Note and/or
the Related Indebtedness, then it is Borrower's and Lenders' express intent that
Form of Note
Exhibit C
Page C-1
<PAGE>
all amounts charged in excess of the Maximum Lawful Rate shall be automatically
cancelled, ab initio, and all amounts in excess of the Maximum Lawful Rate
theretofore collected by Lenders shall be credited on the principal balance of
this Note and/or the Related Indebtedness (or, if this Note and all Related
Indebtedness have been or would thereby be paid in full, refunded to Borrower),
and the provisions of this Note and the other Loan Documents immediately be
deemed reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder and thereunder; provided, however, if this
Note has been paid in full before the end of the stated term of this Note, then
Borrower and Lenders agree that Lenders shall, with reasonable promptness after
Lenders discover or are advised by Borrower that interest was received in an
amount in excess of the Maximum Lawful Rate, either refund such excess interest
to Borrower and/or credit such excess interest against this Note and/or any
Related Indebtedness then owing by Borrower to Lenders. Borrower hereby agrees
that as a condition precedent to any claim seeking usury penalties against
Lenders, Borrower will provide written notice to Lenders, advising Lenders in
reasonable detail of the nature and amount of the violation, and Lenders shall
have sixty (60) days after receipt of such notice in which to correct such usury
violation, if any, by either refunding such excess interest to Borrower or
crediting such excess interest against this Note and/or the Related Indebtedness
then owing by Borrower to Lenders. All sums contracted for, charged or received
by Lender for the use, forbearance or detention of any debt evidenced by this
Note and/or the Related Indebtedness shall, to the extent permitted by
applicable law, be amortized or spread, using the actuarial method, throughout
the stated term of this Note and/or the Related Indebtedness (including any and
all renewal and extension periods) until payment in full so that the rate or
amount of interest on account of this Note and/or the Related Indebtedness does
not exceed the Maximum Lawful Rate from time to time in effect and applicable to
this Note and/or the Related Indebtedness for so long as debt is outstanding. In
no event shall the provisions of Chapter 346 of the Texas Finance Code (which
regulates certain revolving credit loan accounts and revolving triparty
accounts) apply to this Note and/or the Related Indebtedness. Notwithstanding
anything to the contrary contained herein or in any of the other Loan Documents,
it is not the intention of Lenders to accelerate the maturity of any interest
that has not accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration. Borrower and Lenders hereby agree
that any and all suits alleging the contracting for, charging or receiving of
usurious interest shall lie in Harris County, Texas, and each irrevocably waive
the right to venue in any other county.
As used herein, the term "Maximum Lawful Rate" shall mean the maximum
lawful rate of interest which may be contracted for, charged, taken, received or
reserved by Lenders in accordance with the applicable laws of the State of Texas
(or applicable United States federal law to the extent that it permits Lender to
contract for, charge, take, receive or reserve a greater amount of interest than
under Texas law), taking into account all Charges (as herein defined) made in
connection with the transaction evidenced by this Note and the other Loan
Documents. As used herein, the term "Charges" shall mean all fees, charges
and/or any other things of value, if any, contracted for, charged, received,
taken or reserved by Lenders in connection with the transactions relating to
this Note and the other Loan Documents, which are treated as interest under
Form of Note
Exhibit C
Page C-2
<PAGE>
applicable law. As used herein, the term "Related Indebtedness" shall mean any
and all debt paid or payable by Borrower to Lenders pursuant to the Loan
Documents or any other communication or writing by or between Borrower and
Lenders related to the transaction or transactions that are the subject matter
of the Loan Documents, except such debt which has been paid or is payable by
Borrower to Lender under the Note.
To the extent that Lender is relying on Chapter 1D of the Texas Credit
Title to determine the Maximum Lawful Rate payable on this Note and/or the
Related Indebtedness, Lender will utilize the weekly ceiling from time to time
in effect as provided in such Chapter 1D, as amended. To the extent United
States federal law permits Lenders to contract for, charge, take, receive or
reserve a greater amount of interest than under Texas law, Lenders will rely on
United States federal law instead of such Chapter 1D for the purpose of
determining the Maximum Lawful Rate. Additionally, to the extent permitted by
applicable law now or hereafter in effect, Lenders may, at their option and from
time to time, utilize any other method of establishing the Maximum Lawful Rate
under such Chapter 1D or under other applicable law by giving notice, if
required, to Borrower as provided by applicable law now or hereafter in effect.
Notwithstanding anything in this Note to the contrary, if at any time
(i) interest rate provided for under this Note or any other Loan Document (the
"Stated Rate"), and (ii) the Charges computed over the full term of this Note,
exceed the Maximum Lawful Rate, then the rate of interest payable hereunder,
together with all Charges, shall be limited to the Maximum Lawful Rate;
provided, however, that any subsequent reduction in the Stated Rate shall not
cause a reduction of the rate of interest payable hereunder below the Maximum
Lawful Rate until the total amount of interest earned hereunder, together with
all Charges, equals the total amount of interest which would have accrued at the
Stated Rate if such interest rate had at all times been in effect. Changes in
the Stated Rate resulting from a fluctuations in the rates used to calculate the
Stated Rate shall be subject to the provisions of this paragraph.
The holder hereof shall be entitled to the benefits of the other Loan
Documents (to the extent and with the effect as therein provided).
The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
Time is of the essence of this Note.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS.
[Signature page follows]
Form of Note
Exhibit C
Page C-3
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Note as of the date written above.
AmREIT, Inc.
By:
Name:
Title:
Form of Note
Exhibit C
Page C-4
<PAGE>
FORM OF NOTICE OF BORROWING
_____________, 199__
Wells Fargo Bank, National Association
Disbursement and Operations Center
2120 East Park Place, Suite 100
El Segundo, California 90245
Attention: David Cannon
Ladies and Gentlemen:
Reference is made to that certain Revolving Credit Agreement dated as
of November 6, 1998, as amended (the "Credit Agreement"), by and among AmREIT,
Inc., a Maryland corporation (the "Borrower"), the financial institutions party
thereto and their assignees under Section 11.8 thereof, and Wells Fargo Bank,
National Association, as Agent (the "Agent"). Capitalized terms used herein and
not otherwise defined herein, have their respective meanings given them in the
Credit Agreement.
1. Pursuant to Section 2.2 of the Credit Agreement, the Borrower
hereby requests that the Lenders make a Revolving Loan to the
Borrower in an amount equal to $_________________.
2. The Borrower requests that the Revolving Loan be made available to
the Borrower on _______________, 199__.
3. The Borrower hereby requests that the requested Revolving Loan be
of the following Type:
[Check one box only]
[ ] Base Rate Loan
[ ] LIBOR Loan, with an initial Interest Period for a
duration of:
[Check one box only] [ ] one month
[ ] two months
[ ] three months
[ ] six months
[ ] twelve months (requires approval of all Lenders)
4. The proceeds of the Revolving Loan will be used for the following:
_________________________________________________________________
Form of Notice of Borrowing
Exhibit D
Page D-1
<PAGE>
_________________________________________________________________.
The Borrower hereby certifies to the Agent and the Lenders that as of
the date hereof, as of the date of the making of the requested Revolving Loan,
and after making such Revolving Loan, (a) no Default or Event of Default shall
have occurred and be continuing and (b) the representations and warranties of
the Borrower contained in the Credit Agreement and the other Loan Documents are
and shall be true and correct in all material respects, except to the extent
such representations or warranties specifically relate to an earlier date or
such representations or warranties have become untrue by reason of events or
conditions otherwise permitted under the Credit Agreement or the other Loan
Documents.
AmREIT, Inc.
By:
Name:
Title:
Form of Notice of Borrowing
Exhibit D
Page D-2
<PAGE>
FORM OF NOTICE OF CONTINUATION
______________, 199__
Wells Fargo Bank, National Association
Disbursement and Operations Center
2120 East Park Place, Suite 100
El Segundo, California 90245
Attention: David Cannon
Ladies and Gentlemen:
Reference is made to that certain Revolving Credit Agreement dated as
of November 6, 1998, as amended (the "Credit Agreement"), by and among AmREIT,
Inc., a Maryland corporation (the "Borrower"), the financial institutions party
thereto and their assignees under Section 11.8 thereof, and Wells Fargo Bank,
National Association, as Agent (the "Agent"). Capitalized terms used herein, and
not otherwise defined herein, have their respective meanings given them in the
Credit Agreement.
Pursuant to Section 2.4 of the Credit Agreement, the Borrower hereby
requests a Continuation of a LIBOR Loan under the Credit Agreement, and in that
connection sets forth below the information relating to such Continuation as
required by such Section of the Credit Agreement:
1. The requested date of such Continuation is ________________, 199__.
2. The aggregate principal amount of the LIBOR Loan subject to the requested
Continuation is $________________ and the portion of such principal amount
subject to such Continuation is $_________________.
3. The current Interest Period of the Loan subject to such Continuation ends
on ______________, 199__.
4. The duration of the Interest Period for the Loan or portion thereof
subject to such Continuation is:
[Check one box only] [ ] one month
[ ] two months
[ ] three months
[ ] six months
[ ] twelve months (requires approval of all Lenders)
Form of Notice of Continuation
Exhibit E
Page E-1
<PAGE>
The Borrower hereby certifies to the Agent, the Issuing Bank and the
Lenders that as of the date hereof, as of the proposed date of the requested
Continuation, and after giving effect to such Continuation, no Event of Default
shall have occurred and be continuing.
If notice of the requested Continuation was given previously by
telephone, this notice is to be considered the written confirmation of such
telephone notice required by Section 2.4 of the Credit Agreement.
AmREIT, Inc.
By:
Name:
Title:
Form of Notice of Continuation
Exhibit E
Page E-2
<PAGE>
FORM OF NOTICE OF CONVERSION
______________, 199__
Wells Fargo Bank, National Association
Disbursement and Operations Center
2120 East Park Place, Suite 100
El Segundo, California 90245
Attention: David Cannon
Ladies and Gentlemen:
Reference is made to that certain Revolving Credit Agreement dated as
of November 6, 1998, as amended (the "Credit Agreement"), and among AmREIT,
Inc., a Maryland corporation (the "Borrower"), the financial institutions party
thereto and their assignees under Section 11.8 thereof, and Wells Fargo Bank,
National Association, as Agent (the "Agent"). Capitalized terms used herein, and
not otherwise defined herein, have their respective meanings given them in the
Credit Agreement.
Pursuant to Section 2.5 of the Credit Agreement, the Borrower hereby
requests a Conversion of a Loan of one Type into a Loan of another Type under
the Credit Agreement, and in that connection sets forth below the information
relating to such Conversion as required by such Section of the Credit Agreement:
1. The requested date of such Conversion is _____________, 199__.
2. The Type of Loan to be Converted pursuant hereto is currently:
[Check one box only] [ ] Base Rate Loan
[ ] LIBOR Loan
3. The aggregate principal amount of the Loan subject to the requested
Conversion is $____________ and the portion of such principal amount
subject to such Conversion is $ _______________.
Form of Notice of Conversion
Exhibit F
Page F-1
<PAGE>
4. The amount of such Loan to be so Converted is to be converted into a Loan
of the following Type:
[Check one box only]
[ ] Base Rate Loan
[ ] LIBOR Loan, with an initial Interest Period for a duration of:
[Check one box only] [ ] one month
[ ] two months
[ ] three months
[ ] six months
[ ] twelve months(requires approval of all Lenders)
The Borrower hereby certifies to the Agent, the Issuing Bank and the
Lenders that as of the date hereof, as of the proposed date of the requested
Conversion, and after giving effect to such Conversion, no Event of Default
shall have occurred and be continuing.
If notice of the requested Conversion was given previously by
telephone, this notice is to be considered the written confirmation of such
telephone notice required by Section 2.5 of the Credit Agreement.
AmREIT, Inc.
By:
Name:
Title:
Form of Notice of Converstion
Exhibit F
Page F-2
<PAGE>
FORM OF EXTENSION REQUEST
___________________, 199_
Wells Fargo Bank, National Association
1000 Louisiana, 4th Floor
Houston, Texas 77002
Attention: David Williams
Ladies and Gentlemen:
Reference is made to that certain Revolving Credit Agreement dated as
of November 6, 1998 (the "Credit Agreement"), by and among AmREIT, Inc., a
Maryland corporation (the "Borrower"), the financial institutions party thereto
and their assignees under Section 11 thereof, and Wells Fargo Bank, National
Association, as Agent (the "Agent"). Capitalized terms used herein, and not
otherwise defined herein, have their respective meanings given them in the
Credit Agreement.
Pursuant to Section 2.11 of the Credit Agreement, the Borrower hereby
requests that the Lenders and Agent extend the current Revolving Credit
Termination Date of November 10, 1999, by a three-month period to February 6,
2000.
The Borrower hereby certifies to the Agent, the Issuing Bank and the
Lenders that as of the date hereof (a) no Default or Event of Default has
occurred and is continuing, and (b) the representations and warranties of the
Borrower contained in the Credit Agreement and the other Loan Documents are true
and correct in all material respects, except to the extent such representations
or warranties specifically relate to an earlier date or such representations or
warranties have become untrue by reason of events or conditions otherwise
permitted under the Credit Agreement or the other Loan Documents.
AmREIT, Inc.
By:
Name:
Title:
Form of Extension Report
Exhibit G
Page G-1
<PAGE>
FORM OF OPINION
November 6, 1998
Wells Fargo Bank, National Association, as Agent
1000 Louisiana, 4th Floor
Houston, Texas 77002-5093
Re: $30,000,000.00 Revolving Credit Facility
Ladies and Gentlemen:
We have acted as counsel to AmREIT, Inc., a Maryland corporation (the
"Corporation"), and AmREIT Operating Corporation, a Texas corporation
("Guarantor") in connection with the $30,000,000.00 revolving credit facility
provided pursuant to that certain Revolving Credit Agreement dated as of
November 6, 1998 (the "Agreement") by and among the Corporation, the financial
institutions from time to time a party thereto (collectively, the "Lenders," and
each a "Lender") and Wells Fargo Bank, National Association, as a Lender and as
Agent ("Agent"). This Opinion Letter (herein so called) is furnished to you as
required by Section 5.1(d) of the Agreement. Capitalized terms used in this
Opinion Letter and not defined herein are defined as set forth in the Agreement.
Our opinions are limited in all respects to the substantive law of the
State of Texas, the federal law of the United States and, solely to the extent
addressed by the opinion addressed to me by _____ referred to in Section II
hereof, the General Corporate Law of the State of Maryland, and we assume no
responsibility as to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction.
I. Documents Reviewed
A. Documents Reviewed--Loan Documents. As counsel to
the Corporation, we have reviewed the following
documents and instruments (collectively, the
"Transaction Documents"):
1. Agreement;
2. Promissory Note, dated as of November 6, 1998,
executed by Borrower and payable to the order of
Wells Fargo Bank, National Association in the
original principal amount of $30,000,000.00; and
3. Guaranty executed by Guarantor dated as of November
6, 1998.
Form of Opinion
Exhibit H
Page H-1
<PAGE>
B. Documents Reviewed--Other Documents Examined: In addition to the
Transaction Documents, other documents we have examined in rendering
this opinion, and upon which we have relied, include the following:
1. The Articles of Incorporation of the Corporation,
certified by the Secretary of State of Maryland on
October 29, 1998;
2. The Bylaws of the Corporation, certified to be true
and correct by the Secretary of the Corporation as of
November 6, 1998;
3. Certificates from the Secretary of State of Maryland
indicating that the Corporation is in good standing
in the State of Maryland as of October 29, 1998;
4. Certificates from the Secretary of State of the State
of Texas indicating that the Corporation is
authorized to do business in the State of Texas as of
October 19, 1998;
5. Certificates from the Comptroller of Public Accounts
of Texas indicating that the Corporation is in good
standing in the State of Texas as of October 19,
1998;
6. The Articles of Incorporation of the Guarantor,
certified by the Secretary of State of Texas on
October 19, 1998;
7. The Bylaws of the Guarantor, certified to be true and
correct by the Secretary of the Guarantor as of
November 6, 1998;
8. Certificates from the Secretary of State of the State
of Texas indicating that the Guarantor is in
existence in the State of Texas as of October 19,
1998;
9. Certificates from the Comptroller of Public Accounts
of the State of Texas indicating that the Guarantor
is in good standing in the State of Texas as of
October 19, 1998;
10. Copies of resolutions adopted by the Board of
Directors of the Corporation authorizing the
execution, delivery, and performance of the
Transactional Documents to which the Corporation is a
party, and certified by its Secretary as of
November 6, 1998; and
Form of Opinion
Exhibit H
Page H-2
<PAGE>
11. Copies of resolutions adopted by the Board of
Directors of the Guarantor authorizing the execution,
delivery, and performance of the Transaction
Documents to which the Guarantor is a party, and
certified by its Secretary as of November 6, 1998.
II. Qualifications to Factual Examination;
Reliance on Local Counsel
We have been furnished with and examined originals or copies, certified
or otherwise identified to our satisfaction, of all such records of the
Corporation, agreements and other instruments, certificates of officers and
representatives of the Corporation, certificates of public officials, and other
documents, and we have had such discussions with appropriate officers of the
Corporation as we have deemed necessary or desirable as a basis for the opinions
hereinafter expressed. As to questions of fact material to such opinions, we
have, where relevant facts were not independently verified or established,
relied upon certificates of and discussions with officers of the Corporation.
In rendering the opinions expressed in paragraphs 1, 2, 4, 5 and 6
below, we have relied solely on the opinion of _______, dated of even date
herewith, a copy of which is being concurrently delivered to you, to the extent
those opinions concern the law of the State of Maryland. We have made no
independent examination of the laws of the State of Maryland.
III. Assumptions
For purposes of this opinion, we have assumed: (i) the genuineness of
all signatures on all documents (other than the Corporation and the Guarantor on
the Transaction Documents); (ii) the authenticity of all documents submitted to
us as originals; (iii) the conformity to the originals of all documents
submitted to us as copies; (iv) the correctness and accuracy of all facts set
forth in all certificates and reports identified in this opinion; and (v) the
due authorization, execution, and delivery of and the validity and binding
effect of the Transaction Documents with regard to the parties to the
Transaction Documents other than the Corporation.
IV. Opinions
Based upon and subject to the foregoing and the other qualifications
and limitations stated in this Opinion Letter, we are of the opinion that:
1. The Corporation is duly incorporated, validly existing, and
in good standing under the laws of the State of Maryland and
is a real estate investment trust under Section 856 of the
Internal Revenue Code. The Corporation is authorized to do
business and is in good standing in the State of Texas.
Form of Opinion
Exhibit H
Page H-3
<PAGE>
2. The Corporation and the Guarantor have the corporate power
and authority to execute, deliver, and perform their
respective obligations under the Transaction Documents to
which they are a party. The Transaction Documents to which
either the Corporation or the Guarantor is a party have been
duly authorized by all necessary corporate action on the part
of such Person and have been duly executed and delivered by
such Person.
3. The Transaction Documents to which the Corporation or the
Guarantor is a party are enforceable against such Person.
4. The execution and delivery by the Corporation and the
Guarantor, as applicable, of, and performance of their
agreements in, the Transaction Documents to which either
Person is a party do not (i) violate the articles of
incorporation or bylaws of such Person, breach, or result in a
default under, any existing obligation of such Person under
any agreement binding on such Person, or (ii) breach or
otherwise violate any existing obligation of such Person.
5. The execution and delivery of the Transaction Documents to
which either the Corporation or the Guarantor is a party,
the consummation of the transactions contemplated thereby, and
compliance by such Person with the provisions thereof will not
violate any Texas or federal statute or regulation, or
Maryland Corporation Law.
6. No consent, approval, waiver, license or authorization or
other action by or filing with any governmental authority is
required under Texas, Maryland or federal statutes or
regulations in connection with the execution and delivery by
the Corporation or the Guarantor of the Transaction Documents
to which such Person is a party, except for those already
obtained or completed.
7. The Corporation's authorized capitalization consists of
_______ shares of common stock, $_______ par value per
share, of which _______ shares are issued and outstanding.
The outstanding shares have been duly authorized and validly
issued and are fully paid and nonassessable.
8. The Corporation is not an "investment company" or a company
"controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940, as amended.
9. The Transaction Documents are not usurious contracts.
Form of Opinion
Exhibit H
Page H-4
<PAGE>
V. Enforceability Limitations
The opinions expressed in paragraph 3 are qualified and may be limited
as follows:
A. The enforceability of the Transaction Documents is subject to the
effect of bankruptcy, insolvency, reorganization, receivership,
moratorium, or other similar laws affecting the rights and remedies of
creditors generally.
B. The enforceability of the Transaction Documents is
subject to the effect of general principles of
equity.
The qualification of any opinion or statement herein by the use of the
words "to our knowledge" or "known to us" means that during the course of
representation as described in this Opinion Letter, no information has come to
the attention of the attorneys in this Firm which would give such attorneys
current actual knowledge of the existence of the facts so qualified. Except as
set forth herein, we have not undertaken any investigation to determine the
existence of such facts, and no inference as to our knowledge thereof shall be
drawn from the fact of our representation of any party or otherwise.
This Opinion Letter (i) has been furnished to Agent and Lenders at your
request, and we consider it to be a confidential communication which may not be
furnished, reproduced, distributed or disclosed to anyone without our prior
written consent, (ii) is rendered solely for Agent's and Lenders' information
and assistance in connection with the above transaction, and may not be relied
upon by any other person or for any other purpose without our prior written
consent, (iii) is rendered as of the date hereof, and we undertake no, and
hereby disclaim any, obligation to advise you of any changes or any new
developments which might affect any matters or opinions set forth herein; and
(iv) is limited to the matters stated herein and no opinions may be inferred or
implied beyond the matters expressly stated herein.
Very truly yours,
By:
Form of Opinion
Exhibit H
Page H-5
<PAGE>
FORM OF UNENCUMBERED POOL CERTIFICATE
Reference is made to that certain Revolving Credit Agreement dated as
of November 6, 1998 (the "Credit Agreement"), by and among AmREIT, Inc., a
Maryland corporation (the "Borrower"), the financial institutions party thereto
and their assignees under Section 11.8 thereof and Wells Fargo Bank, National
Association, as Agent (the "Agent"). Capitalized terms used herein, and not
otherwise defined herein, have their respective meanings given them in the
Credit Agreement.
1. Pursuant to Section 4.l(b)(ii) or Section 7.1(d), as applicable, of
the Credit Agreement, the undersigned hereby certifies to the Lenders and the
Agent that Schedule I attached hereto accurately and completely sets forth, as
of the date hereof: (i) the identity of each Eligible Property as to which
Borrower seeks Lenders' approval as a Pool Property, (ii) assuming the approval
of each such Eligible Property as a Pool Property, (A) on a pro forma basis the
Maximum Loan Availability, (B) the Occupancy Rate and Economic Occupancy Rate of
such Property, (C) the aggregate Occupancy Rate and Economic Occupancy Rate of
all Unencumbered Pool Properties, assuming the approval of each such Eligible
Property as a Pool Property, and (D) the amount of the Unencumbered Pool Value,
assuming that such Property is accepted as an Unencumbered Pool Property,
attributable to all Unencumbered Pool Properties which are owned by Subsidiaries
that are not Wholly Owned Subsidiaries.
The undersigned further certifies to the Agent and the Lenders that as
of the date hereof (a) no Default or Event of Default has occurred and is
continuing, and (b) the representations and warranties of the Borrower contained
in the Credit Agreement and the other Loan Documents are true and correct in all
material respects, except to the extent such representations or warranties
specifically relate to an earlier date or such representations or warranties
become untrue by reason of events or conditions otherwise permitted under the
Credit Agreement or the other Loan Documents.
IN WITNESS WHEREOF, the undersigned has signed this Unencumbered Pool
Certificate on and as of __________, 19__.
______________________________
Name:_________________________
Title: Chief Financial Officer
Form of Unencumbered Pool Certificate
Exhibit I
Page I-1
<PAGE>
FORM OF ELIGIBILITY CERTIFICATE
Reference is made to that certain Revolving Credit Agreement dated as
of November 6, 1998 (the "Credit Agreement"), by and among AmREIT, Inc., a
Maryland corporation (the "Borrower"), the financial institutions party thereto
and their assignees under Section 11.8 thereof and Wells Fargo Bank, National
Association, as Agent (the "Agent"). Capitalized terms used herein, and not
otherwise defined herein, have their respective meanings given them in the
Credit Agreement.
Pursuant to Section 4.1 (b)(iii) of the Credit Agreement, the
undersigned hereby certifies to the Agent and the Lenders, with respect to each
of the properties listed on Schedule 1 attached hereto, that:
(a) such property is improved with one
or more operating retail properties.
(b) such property is 100% owned in fee simple by Borrower or
by a Wholly Owned Subsidiary designated as the owner of such
property on Schedule 1. Schedule 1 sets forth the capital
structure of each such
Wholly Owned Subsidiary.
(c) (i) neither such property, nor any interest of Borrower or
such Wholly Owned Subsidiary therein, is subject to any Lien
other than Permitted Liens or to any agreement (other than the
Credit Agreement or any other Loan Document) that prohibits
the creation of any Lien thereon as security for Indebtedness;
(ii) if such property is owned by a Wholly Owned Subsidiary:
(A) none of Borrower's direct or indirect ownership interest
in such Wholly Owned Subsidiary is subject to any Lien other
than Permitted Liens or to any agreement (other than the
Credit Agreement or any other Loan Document) that prohibits
the creation of any Lien thereon as security for Indebtedness
and (B) neither such Wholly Owned Subsidiary, nor any other
Wholly Owned Subsidiary through which Borrower holds any
indirect interest in such Wholly Owned Subsidiary, is subject
to any restriction of any kind which would limit its ability
to pay or perform its obligations under the Guaranty required
to be delivered under the Credit Agreement prior to its
obligation to pay dividends or make any other distribution on
any of such Wholly Owned Subsidiary's capital stock or other
securities owned by Borrower or any other Wholly Owned
Subsidiary of Borrower; (iii) such property has an Occupancy
Rate of at least 80% and an Economic Occupancy Rate of at
least 95%, and (iv) such property is free of all structural
defects, title defects, environmental conditions or other
adverse matters except for defects, conditions or matters
individually or collectively which are not material to the
profitable operation of such property.
(d) if such property were an Unencumbered Pool Property, the
aggregate Occupancy Rate and Economic Occupancy Rate of all
Unencumbered Pool Properties as of the date hereof (including
all properties listed on Schedule 1), would not be less than
eighty percent (80%) and ninety-five percent (95%),
respectively.
Form of Eligibility Certificate
Exhibit J
Page J-1
<PAGE>
(e) (i) Borrower has obtained, with respect to such property,
a "Phase I" environmental assessment
(ii) Borrower has reviewed such assessments and believes
it reasonable to rely upon such assessments; and
(iii) such assessments do not (1) identify any
contamination or potential contamination that has resulted
in, or that could reasonably be anticipated to result in
a materially adverse effect upon the condition, market
value, Net Operating Income or prospects of such property,
(2) recommend that any further material investigation be
undertaken, or (3) identify any potential or actual
recognized environmental condition.
IN WITNESS WHEREOF, the undersigned has signed this Eligibility
Certificate on and as of___________, 19__.
____________________________________
Name:
Printed:
Title: Chief Financial Officer
Form of Eligibility Certificate
Exhibit J
Page J-2
<PAGE>
Schedule 1
TO ELIGIBILITY CERTIFICATE
(A) Property Description [For each Property]
1. Property Name:
2. Owner: [If not Borrower, set forth capital structure of the owner]
3. Location: [Including City, State, County and address]
4. Environmental Information:
a. Date Phase I prepared: __________________________________
b. The Phase I was prepared by: ____________________________
5. Summary of Existing Tenants: [Including Rent Rolls in detail
satisfactory to Agent]
Form of Eligibility Certificate
Exhibit J
Page J-3
<PAGE>
REAFFIRMATION OF GUARANTY
THIS REAFFIRMATION OF GUARANTY is made and executed as of the ___ day
of _____________, ____ by ______________________, a _____________________ (each,
a "Guarantor") and delivered to Wells Fargo Bank, National Association, a
national banking association ("Agent") for the benefit of Lenders. Capitalized
terms used herein and not otherwise defined herein shall have the same
definition and meaning as set forth in the Credit Agreement (as hereinafter
defined).
A. Guarantor executed and delivered a Guaranty to Lenders dated as of
November 6, 1998 (the "Guaranty") pursuant to and as a requirement of the
revolving credit facility made available by Lenders to AmREIT, Inc., a Maryland
corporation (the "Borrower"), in the maximum outstanding principal amount of
$30,000,000 under and pursuant to that certain Revolving Credit Agreement dated
November 6, 1998, by and among Borrower, each bank and financial institution
from time to time a Lender thereunder and Agent (the "Credit Agreement");
B. Borrower has requested and Lenders have agreed to make a new
Revolving Loan to the Borrower in the amount of $_________________ (the "New
Revolving Loan") under the Credit Agreement on or about the date hereof;
C. Lenders are not willing to make the New Revolving Loan to the
Borrower unless each Guarantor unconditionally reaffirms his obligations under
the Guaranty as contemplated by the terms of the Credit Agreement;
D. Each Guarantor will benefit, directly or indirectly, from Lenders'
making the New Revolving Loan to the Borrower.
NOW THEREFORE, as an inducement to Lenders to make the New Revolving
Loan to the Borrower and for other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged, each Guarantor hereby
agrees as follows:
(a) Each Guarantor does hereby unconditionally reaffirm all of its obligations
to Lenders under the Guaranty including, without limitation, the payment and
performance of the Guaranteed Obligations as set forth in the Guaranty, which
Guaranteed Obligations shall include the Obligations evidenced by the New
Revolving Loan.
(b) Each Guarantor certifies that the representations and warranties contained
in the Guaranty made by such Guarantor remain true, correct and complete in all
material respects as of the date hereof with the same force and effect as if
made on the date hereof and that it has no offsets, counterclaims or defenses to
any of its obligations under the Guaranty.
(c) Except as modified hereby, the Guaranty remains unmodified and in full force
and effect.
Reaffirmation of Guaranty
Exhibit K
Page K-1
<PAGE>
EXECUTED as of the day and year first above written.
[SIGNATURE OF GUARANTORS]
Reaffirmation of Guaranty
Exhibit K
Page K-2
<PAGE>
<TABLE>
<CAPTION>
UNENCUMBERED POOL PROPERTIES AS OF AGREEMENT DATE
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
Date Square Expiration REIT Ownership
Ct. Tenant/Asset City State Acquired Footage Date Ownership Info
- --- ------------ ---- ----- -------- ------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
I. Wholly-Owned
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
1. AFC, Inc. Atlanta GA 07/22/94 2,320 07/22/14 100.00% Wholly-owned
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
2. Radio Shack Dallas TX 06/15/94 5,200 11/30/06 100.00% Wholly-owned
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
3. OneCare (Copperfield) Houston TX 07/01/95 14,000 09/30/95 100.00% Wholly-owned
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
4. Bank United Houston TX 12/11/96 3,685 12/31/11 100.00% Wholly-owned
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
5. Hollywood Video Ridgeland MS 12/30/97 7,488 12/22/12 100.00% Wholly-owned
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
6. Office Max Lake Jackson TX 02/20/98 23,500 04/01/13 100.00% Wholly-owned
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
7. Office Max Dover DE 05/15/98 23,500 04/01/13 100.00% Wholly-owned
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
8. Just For Feet The Woodlands TX 05/15/98 16,922 05/01/13 100.00% Wholly-owned
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
9. Just For Feet Sugar Land TX 05/15/98 16,922 05/01/13 100.00% Wholly-owned
- --------------------------------------------------------------------------------------------------------------------
II. Majority Owned
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
10. Blockbuster Music Indepdence MO 11/14/94 14,047 04/30/04 54.840% A10=45.16%
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
A10=18.25%,
11. Just for Feet Tucson AZ 09/11/96 19,550 09/30/16 51.900% A11=29.85%
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
12. Blockbuster Music Wichita KS 09/12/95 15,158 12/31/04 51.000% A11=49%
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
13. Bank United The Woodlands TX 09/23/96 3,685 09/30/11 51.000% A11=49%
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
14. Just For Feet Baton Rouge LA 06/09/97 20,575 05/15/12 51.000% A11=49%
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
15. Hollywood Video Lafayette LA 10/31/97 7,488 09/24/12 74.580% A11=25.42%
- ---------- ---------------------- --------------- ----- ---------- --------- ------------- ----------- -------------
</TABLE>
Schedule 4.1
Unencumbered Pool Properties as of Agreement Date
<PAGE>
OWNERSHIP STRUCTURE
Listed below is a complete corporate structure and ownership interests of
Borrower and all of its Subsidiaries as of the date hereto, including the
correct legal name of Borrower and each such Subsidiary, and Borrower's relative
equity interest in each Subsidiary:
AmREIT, Inc., organized on August 17, 1993, operates as an REIT.
AmREIT Operating Corporation is a wholly-owned subsidiary of AmREIT, Inc.
AmREIT, Inc. owns 100% of the outstanding preferred stock of
AmREIT Realty Investment Corporation.
Schedule 6.2
Ownership Structure
<PAGE>
INDEBTEDNESS AND GUARANTEES
None.
Schedule 6.6
Indebtedness & Guarantees
<PAGE>
PROPERTY MANAGEMENT AGREEMENTS
AND OTHER MAJOR AGREEMENTS
None.
Schedule 6.7
Management Agreements and Other Major Agreements
<PAGE>
INSURANCE
[See attached.]
Schedule 6.15
Insurance
<PAGE>
[CERTIFICATE OF INSURANCE]
RADIO SHACK - TEXAS
<PAGE>
[CERTIFICATE OF INSURANCE]
AFC, INC. - GEORGIA
<PAGE>
[CERTIFICATE OF INSURANCE]
BLOCKBUSTER - MISSOURI
<PAGE>
[CERTIFICATE OF INSURANCE]
ONECARE - TEXAS
<PAGE>
[CERTIFICATE OF INSURANCE]
BLOCKBUSTER - KANSAS
<PAGE>
[CERTIFICATE OF INSURANCE]
JUST FOR FEET - ARIZONA
<PAGE>
[CERTIFICATE OF INSURANCE]
BANK UNITED - THE WOODLANDS, TEXAS
<PAGE>
[CERTIFICATE OF INSURANCE]
BANK UNITED - HOUSTON, TEXAS
<PAGE>
[CERTIFICATE OF INSURANCE]
JUST FOR FEET - LOUISIANA
<PAGE>
[CERTIFICATE OF INSURANCE]
HOLLYWOOD VIDEO - LOUISIANA
<PAGE>
[CERTIFICATE OF INSURANCE]
HOLLYWOOD VIDEO - MISSISSIPPI
<PAGE>
[CERTIFICATE OF INSURANCE]
OFFICE MAX - TEXAS
<PAGE>
[CERTIFICATE OF INSURANCE]
OFFICE MAX - DELAWARE
<PAGE>
[CERTIFICATE OF INSURANCE]
JUST FOR FEET - THE WOODLANDS, TEXAS
<PAGE>
[CERTIFICATE OF INSURANCE]
JUST FOR FEET - SUGAR LAND, TEXAS
<PAGE>
EXHIBIT 11
AMREIT, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Quarter Year to Date
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE:
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,377,505 1,649,002 2,177,086 1,478,942
========= ========= ========= =========
NET INCOME (LOSS) $ 159,211 $ 235,744 $(1,908,501) $ 618,692
========= ========= =========== =========
BASIC EARNINGS (LOSS) PER SHARE $ 0.07 $ 0.14 $ (0.88) $ 0.42
========= ========= =========== =========
DILUTED EARNINGS (LOSS) PER SHARE:
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,377,505 1,649,002 2,177,086 1,478,942
SHARES ISSUABLE FROM ASSUMED
CONVERSION OF STOCK WARRANTS - 61,479 - 61,479
------- ------- ------- -------
TOTAL WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING,
AS ADJUSTED 2,377,505 1,710,481 2,177,086 1,540,421
========= ========= ========= =========
NET INCOME (LOSS) $ 159,211 $ 235,744 $(1,908,501) $ 618,692
========= ========= =========== =========
DILUTED EARNINGS (LOSS) PER SHARE $ 0.07 $ 0.14 $ (0.88) $ 0.40
========= ========= =========== =========
</TABLE>
-16-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 239,216
<SECURITIES> 0
<RECEIVABLES> 745,226
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 984,442
<PP&E> 28,192,920
<DEPRECIATION> 582,987
<TOTAL-ASSETS> 32,752,546
<CURRENT-LIABILITIES> 9,971,403
<BONDS> 0
0
0
<COMMON> 23,841
<OTHER-SE> 21,655,867
<TOTAL-LIABILITY-AND-EQUITY> 32,752,546
<SALES> 1,933,887
<TOTAL-REVENUES> 2,115,334
<CGS> 0
<TOTAL-COSTS> 3,629,196
<OTHER-EXPENSES> 394,639
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,908,501)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,908,501)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,908,501)
<EPS-PRIMARY> (0.88)
<EPS-DILUTED> (0.88)
</TABLE>
