U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X]QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file No. 1-13080
GROVE PROPERTY TRUST
(Exact name of small business issuer as specified in its charter)
Maryland 06-1391084
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
598 Asylum Avenue, Hartford, Connecticut 06105
(Address of principal executive offices) (Zip Code)
(860) 246-1126
(Issuer's telephone number)
GROVE REAL ESTATE ASSET TRUST
(Former Name)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes: X No:
3,953,435 common shares, $.01 par value, were outstanding as of May 15, 1997.
Transitional Small Business Disclosure Format (check one): Yes: No: X
<PAGE>
Form 10-QSB
Index
Page
Part I: Financial Information 3
Item 1: Financial Statements 3
Balance Sheets of Grove Property Trust as of March 31, 1997 3
and December 31, 1996
Income Statements of Grove Property Trust for the three 4 months
ended March 31, 1997 and March 31, 1996 4
Statements of Cash flows of Grove Property Trust for the three 5
months ended March 31, 1997 and March 31, 1996
Notes to Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition and 9
Results of Operations
Part II: Other Information 12
Item 2: Changes in Securities 12
Item 4: Submission of Matters to a Vote of Security Holders 12
Item 6: Exhibits and Reports on Form 8-K 13
Signatures 15
Exhibit Index 16
<PAGE>
GROVE PROPERTY TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
(Unaudited) (Audited)
----------- ---------
ASSETS
Real estate assets:
Land ................................. $ 8,749,432 $ 920,293
Buildings and improvements ........... 78,229,518 8,528,075
Furniture, fixtures and equipment .... 4,529,079 349,768
------------ ------------
91,508,029 9,798,136
Less - accumulated depreciation ...... (25,840,685) (1,049,815)
------------ ------------
Net real estate assets ....... 65,667,344 8,748,321
Cash and cash equivalents .................... 4,865,648 381,340
Cash - resident security deposits ............ 848,200 157,537
Other assets ................................. 1,463,527 233,412
------------ ------------
Total assets ................................ $ 72,844,719 $ 9,520,610
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable ............. $29,149,658 $ 5,668,578
Other liabilities .................. 6,340,574 350,341
Due to affiliates .................. 669,722 19,190
----------- -----------
Total liabilities .......................... 36,159,954 6,038,109
----------- -----------
Commitments
Minority interest .......................... 33,627 --
Shareholders' equity:
Preferred shares, $.01 par value per
share, 4,000,000 shares authorized;
no shares issued or outstanding - -
Common shares, $.01 par value per share,
10,000,000 shares authorized;
3,953,435 and 525,000 shares issued
and outstanding 39,534 5,250
Additional paid-in capital 37,013,258 3,913,176
Distributions in excess of earnings (401,654) (435,925)
-------------- -------------
Total equity 36,651,138 3,482,501
-------------- -------------
Total liabilities and shareholders' equity $ 72,844,719 $ 9,520,610
============== =============
<PAGE>
GROVE PROPERTY TRUST
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
For the Three Months Ended
----------------------------------
March 31, March 31,
1997 1996
Revenues:
Rental income ................................ $1,177,022 $ 486,233
Property management .......................... 45,300 --
Interest and other income .................... 83,846 8,872
---------- ----------
Total revenues ........................... 1,306,168 495,104
---------- ----------
Expenses:
Property operating and maintenance ........... 487,630 180,474
Real estate taxes ............................ 116,018 49,607
Related party management fees ................ 21,795 25,535
General and administrative ................... 69,035 20,424
---------- ----------
Total expenses ........................... 694,478 276,041
---------- ----------
611,690 219,063
Interest expense ................................. 173,122 87,624
Depreciation and amortization .................... 239,628 110,486
Conveyance taxes ................................. 68,761 --
---------- ----------
Income before minority interest ...... 130,180 20,953
Minority interest .................... 33,627 --
---------- ----------
Net income ....................... $ 96,553 $ 20,953
========== ==========
Net income per share ............................. $ 0.08 $ 0.03
========== ==========
Weighted average number of shares ................ 1,249,732 620,102
========== ==========
<PAGE>
GROVE PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
------------------------------
March 31, March 31,
1997 1996
Net cash provided by operating activities ......... $ 949,197 $ 123,745
------------ ----------
Cash flows from investing activities:
Acquisition charges ......................... (2,457,828) --
Acquisition of partnership assets, net ...... 2,213,780 --
Additions to real estate assets ............. (20,491) (26,496)
------------ ----------
Net cash used in investing activities ............. (264,538) (26,496)
------------ ----------
Cash flows from financing activities:
Net proceeds from mortgage payable on
acquisition ............................... 15,084,000 235,302
Financing costs ............................. (648,216) (21,000)
Proceeds from New Equity Investment ......... 30,000,000 --
Repayment of mortgage payable ............... (39,657,197) (11,938)
Payments to affiliates ...................... (761,587) (94,683)
Dividends paid .............................. (217,350) (119,438)
------------ ----------
Net cash provided by (used in) financing activities 3,799,650 (11,757)
------------ ----------
Net increase in cash and cash equivalents ......... 4,484,309 85,492
Cash and cash equivalents, beginning of period .... 381,340 383,725
------------ ----------
Cash and cash equivalents, end of period .......... $ 4,865,648 $ 469,217
============ ==========
<PAGE>
GROVE PROPERTY TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. FORMATION AND BUSINESS OF THE COMPANY
Grove Property Trust (formerly Grove Real Estate Asset Trust) (the
"Company") was organized in the State of Maryland on April 4, 1994 as a
Real Estate Investment Trust ("REIT"). The Company currently operates
twenty-four properties with a total of 1,752 residential apartments and
95,255 square feet of commercial property including a 79,000 square foot
neighborhood retail center. The Company purchased three properties on June
23, 1994 (the "Original Properties"), a fourth property ("Cambridge") in
January of 1996, and twenty additional properties on March 14, 1997 (the
"Partnership Properties") from affiliated partnerships (the "Property
Partnerships") in conjunction with a series of transactions (the
"Consolidation Transactions") (collectively the "Properties").
These statements do not contain all information required by generally
accepted accounting principles to be included in a full set of financial
statements. In the opinion of management, the accompanying unaudited
financial statements reflect all the adjustments necessary to present
fairly the financial position of the Company at March 31, 1997 and results
of operations and its cash flows for the period then ended and the period
ended March 31, 1996. These unaudited financial statements should be read
in conjunction with the audited financial statements and notes contained in
the Company's Form 10-KSB for the year ended December 31, 1996. Results of
operations for this period are not necessarily indicative of results to be
expected for the full year.
Earnings per share is based on the weighted average number of common shares
issued and outstanding; 1,249,732 shares from January 1, 1997 to March 31,
1997, and 620,102 from January 1, 1996 to March 31, 1996 (both adjusted for
the Stock Split, as defined in note 2). The dilutive effect of the assumed
exercise of outstanding stock options and warrants is less than 3% and,
therefore, is not included.
In February 1997, the Financial Accounting Standard Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December
31, 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact of
Statement 128 on the calculation of primary and fully diluted earnings per
share for the quarter ended March 31, 1997 and March 31, 1996 is not
material.
2. CONSOLIDATION TRANSACTIONS
The Consolidation Transactions were completed on March 14, 1997 and
included the following:
The Company formed an operating partnership to serve as the vehicle
for the consolidation of ownership and/or control of the operations and
assets of the Company (the "Operating Partnership").
Pursuant to an exchange offer, the Operating Partnership purchased
from limited partners (the "Limited Partners") the outstanding
partnership interest of each of the Property Partnerships in exchange
for partnership units (the "Common Units") of the Operating
Partnership, or, in certain circumstances, cash. The number of Common
Units received by a Limited Partner was calculated based upon such
partner's interest in the applicable partnership as applied to the
value of the Property Partnership associated therewith.
Immediately prior to the consummation of the Consolidation
Transactions, the Company declared a stock dividend aggregating 26,250
Common Shares and concurrently effected a stock split of 1.125 to 1
(collectively the "Stock Split"), thereby issuing on a pro rata basis a
total of 95,102 Common Shares to the holders of the issued and
outstanding Common Shares as March 10, 1997.
The Company issued 3,333,333 Common Shares to new equity investors in
exchange for $30 million.
Pursuant to a contribution agreement (the "Contribution Agreement")
among the Company, certain companies and individuals affiliated with
the Company (the "Grove Companies") and the Operating Partnership,
substantially all of the assets and operations of the Company, the
management services division of Grove Property Services Limited
Partnership and the Grove Companies' interests in the acquired Property
Partnerships were transferred to the Operating Partnership.
In exchange for the above, the Grove Companies received an aggregate of
904,867 Common Units in the Operating Partnership and a cash payment of
$177,669 from the Company, and the Company received 620,102 Common
Units in the Operating Partnership. Additionally, the Company
contributed to the Operating Partnership the gross proceeds received
from new equity investments in exchange for a number of additional
Common Units equal to the number of Common Shares issued by the Company
to the new equity investors.
In connection with the Consolidation Transactions, the Operating
Partnership entered into a three-year secured revolving acquisition and
working capital credit facility of approximately $25 million (the
"Revolving Credit Facility") and an approximately $15.1 million
ten-year term mortgage loan.
The Company used a portion of the proceeds from the new equity
investment, together with borrowings under the new credit facilities to
refinance approximately $39.6 million of mortgage indebtedness of the
Property Partnerships and to acquire certain minority interests in
certain of the Property Partnerships.
The following unaudited pro forma information for the three months ended
March 31, 1997 and 1996 is presented as if the Consolidation Transactions
had occurred at the beginning of 1996. The unaudited information does not
purport to represent what the Company's results of operations would have
actually been if such transactions, in fact, had occurred on January 1,
1996, nor does it purport to represent the results of operations for future
periods.
March 31, 1997 March 31, 1996
-------------- --------------
Revenues $ 4,190,508 $ 3,942,584
Net income before minority interest
and extraordinary items 359,816 307,490
Earnings per share $ 0.09 $ 0.08
3. MORTGAGE NOTES PAYABLE
Mortgage notes payable at March 31, 1997 and December 31, 1996 consist of
the following:
March 31, 1997 December 31, 1996
-------------- -----------------
Amortizing first mortgage notes $ 10,065,658 $ 5,668,578
Interest only first mortgage notes 19,084,000 0
---------- ------------
$ 29,149,658 $ 5,668,578
============= ============
The Amortizing first mortgage notes have fixed interest rates between 7.04%
and 7.49%, have monthly principal and interest payments based on
amortization schedules between 25 and 30 years, and maturities between the
year 2000 and 2013. The notes are collateralized by 6 of the Properties and
are partially guaranteed by certain executive officers and shareholders of
the Company.
<PAGE>
The Interest only first mortgage notes are comprised of two notes and are
collateralized by 9 of the Properties. One note has a principal balance of
$4,000,000, monthly payments of interest only at a fixed rate of 7.50%, and
matures in 1999. The other note has a principal balance of $15,084,000,
monthly payments of interest only at a variable rate of one month LIBOR
plus 1.14% (one month LIBOR was 5.6875% on March 31, 1997), and matures in
2007.
The interest rate on the variable note has effectively been fixed with two
interest rate swap contracts (the "Interest Swaps") with a bank. The
Interest Swaps, in effect, (i) have fixed $7.6 million of debt at 7.67% for
the period from October 1, 1997 through October 1, 2007, and (ii) have
fixed an additional $7.6 million of debt at 7.68% for the period from
October 1, 1997 through January 4, 2005. The Interest Swaps have been
pledged as collateral under the variable note.
4. REVOLVING CREDIT FACILITY
In March 1997, the Operating Partnership entered into a three year
Revolving Credit Facility with a bank, guaranteed by the Company, for up to
$25.0 million. Borrowings under the Revolving Credit Facility are
collateralized by 8 of the Properties (the "Collateral Properties") and
bear interest payable monthly at a floating rate of 1.2% above the 30, 60,
or 90 day LIBOR rate. The Operating Partnership is required to maintain
certain financial covenants as defined in the Revolving Credit Facility
agreement. The Revolving Credit Facility is available to fund future
property acquisitions, up to $4.0 million is available to fund working
capital needs, and up to $2.0 million is available to fund the redemption
of Common Units or the purchase of Common Shares by the Operating
Partnership. As of March 31, 1997, there was no outstanding indebtedness
under the Revolving Credit Facility.
5. STOCK OPTIONS AND WARRANTS
Under the 1996 Share Incentive Plan and in conjunction with the
Consolidation Transactions the Company granted nonqualified stock options
to purchase 300,000 Common Shares with an exercise price equal to the fair
value of the Common Shares at the date of grant.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
The following discussion should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Report.
The results of operations for the three months ended March 31, 1997 include the
three multifamily properties (the "Original Properties") that the Company has
owned since its inception, a fourth property ("Cambridge"), acquired on January
12, 1996, and twenty additional properties acquired on March 14, 1997 in
conjunction with the Consolidation Transactions (the "Consolidation
Properties"), (collectively, the "Properties). The results of operations for the
three months ended March 31, 1996 include the three Original Properties and
Cambridge for the period subsequent to January 11, 1996.
Results of Operations
Results of operations of the Company for the three months ended March 31, 1997
and March 31, 1996.
Total revenues increased $811,064 from $495,104 to $1,306,168 during the three
months ended March 31, 1997, as compared to the corresponding period in 1996.
Approximately $711,100 of the increase is due to operations of the Consolidation
Properties. Additionally, $45,300 of the increase is related to property
management revenues which represent fees earned on management services provided
to properties owned by affiliated entities. Such revenue is derived from
management contracts acquired in conjunction with the Consolidation
Transactions, therefore there was no comparable revenue during the corresponding
period in 1996. The remainder of the increase in total revenues is attributable
to the increases in rental rates experienced at the Original Properties and
Cambridge, discussed below, and from the current period being the first full
period of operations in the Company for Cambridge.
The Original Properties and Cambridge experienced increases in rental rates
which increased revenues. The Original Properties weighted average rental rates
increased to $706 for the three months ended March 31, 1997 from $678 for the
three months ended March 31, 1996. Physical occupancy for the Original
Properties and Cambridge remained at an aggregate weighted average occupancy of
97.6% for the three months ended March 31, 1997 and March 31, 1996. Physical
occupancy for the Original Properties and Cambridge decreased to 97.0% at March
31, 1997 from 97.4% at March 31, 1996. The weighted average physical occupancy
for the Consolidation Properties was 97.8% at March 31, 1997.
Property operating and maintenance expenses increased $307,156 from $180,474 to
$487,630 during the three months ended March 31, 1997, as compared to the
corresponding period in 1996. Expenses increased approximately $309,100 due to
the acquisition of the Consolidation Properties offset by a decrease in
operating and maintenance expenses at the Original Properties and Cambridge due
to the relatively mild winter experienced during 1997 as compared to the harsh
winter experienced in the New England area during the corresponding period in
1996.
General and administrative expenses increased $48,611 from $20,424 to $69,035
during the three months ended March 31, 1997, as compared to the corresponding
period in 1996. The increase is primarily due to additional expenses related to
the acquisition of the Consolidation Properties and increased overhead expenses.
Real estate taxes increased $66,411 from $49,607 to $116,018 during the three
months ended March 31, 1997, as compared to the corresponding period in 1996.
Approximately $63,300 of this increase is attributable to the Consolidation
Properties.
Related party management fees decreased $3,740 from $25,535 to $21,795 during
the three months ended March 31, 1997, as compared to the corresponding period
in 1996. This decrease is due to the acquisition by the Company of the
management services division of Grove Property Services Limited Partnership
("GPS") as part of the Consolidation Transactions.
Interest expense increased $85,497 from $87,624 to $173,121 during the three
months ended March 31, 1997, as compared to the corresponding period in 1996.
Approximately $80,200 of this increase is due to the $23.5 million mortgage debt
assumed and/or refinanced as part of the Consolidation Transactions. The
remaining increase is due to the operations of Cambridge for the full period.
Depreciation and amortization increased $129,142 from $110,486 to $239,628
during the three months ended March 31, 1997, as compared to the corresponding
period in 1996. This increase results from approximately $144,900 attributable
to the Consolidation Properties offset by a decrease in amortization expense of
$15,000 resulting from the prior year write off of financing fees related to a
credit line which was terminated.
Conveyance taxes of $68,761 for the three months ended March 31, 1997 relate to
the Consolidation Transactions. This expense is a non-recurring item.
The Company's net income increased $75,600 from $20,953 to $96,553 during the
three months ended March 31, 1997, as compared to the corresponding period in
1996. Approximately $55,000 of this increase results from the net effect of
decreasing expenses and increasing rental rates at the Original Properties and
Cambridge, as discussed above. The remaining increase is due to the operations
of the Consolidation Properties.
Liquidity and Capital Resources
Cash and cash equivalents totaled $4,865,648 as of March 31, 1997. The Company's
long-term debt to market capitalization on March 31, 1997 was 33% based on total
market capitalization of $88,311,430 (6,067,874 Operating Partnership units
outstanding including minority interest at $9.75 plus long-term debt) and
long-term debt of $29,149,658.
Cash provided by operating activities was $949,197 for the three months ended
March 31, 1997. Cash used in investing activities was $264,539 for the three
months ended March 31, 1997.
Net cash provided by financing activities was $3,799,650 for the three months
ended March 31, 1997.
On March 10, 1997, the Company declared a dividend of $0.184 per share which was
paid on March 28, 1997. The dividends declared during the period of $0.184 per
share resulted in a 34.5% payout of funds from operations for the three months
ended March 31, 1997.
The Company intends to meet its short term liquidity requirements through cash
flow provided by operations. The Company considers its ability to generate cash
to be adequate, and expects it to continue to be adequate to meet operating
requirements and pay shareholder dividends in accordance with REIT requirements.
The Company may use other sources of capital to finance additional acquisitions
including, but not limited to, the selling of additional equity interest in the
Company, non-distributed Funds From Operations, the issuance of debt securities,
funds from the Revolving Credit Facility, and exchanging Common Shares or Common
Units for properties or interest in properties.
The Company continuously evaluates properties for possible acquisition or
disposition. Individual properties may be acquired through direct purchase of
the property or through the purchase of the entity owning such property and may
be made for cash or securities of the Company or the Operating Partnership. In
connection with any acquisition, the Company may incur additional indebtedness.
If the Company acquires or disposes of any property, such acquisition or
disposition could have a significant effect on the Company's financial
condition, results of operations or cash flows.
Funds from Operations
Industry analysts generally consider funds from operations ("FFO") an
appropriate measure of performance of an equity REIT. Funds from operations is
defined as income before gains (losses) on investments and extraordinary items
(computed in accordance with generally accepted accounting principles) plus real
estate depreciation, less preferred dividends and after adjustment for
significant non-recurring items, if any. This definition conforms to the
recommendations set forth in a White Paper adopted by the National Association
of Real Estate Investment Trusts ("NAREIT") in early 1995. FFO for years prior
to 1996 have been adjusted to conform to the NAREIT definition. The Company
believes that in order to facilitate a clear understanding of its operating
results, funds from operations should be examined in conjunction with the net
income as presented in the financial statements and information included
elsewhere in this Report. Funds from operations does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs. Funds from operations should not be considered as an
alternative to net income as an indication of the Company's performance or as an
alternative to cash flow as a measure of liquidity.
FFO increased $148,570 from $131,213 for the three months ended March 31, 1996
to $279,783 for the three months ended March 31, 1997. Dividends declared for
the three months ended March 31, 1997 were $96,600, representing 34.5% of FFO.
However, the dividends declared for the three months ended March 31, 1997 were
for a short dividend period of January 1, 1997 through March 13, 1997, and
therefore the March 31, 1997 FFO payout ratio is not comparable to the March 31,
1996 ratio. Dividends declared for the three months ended March 31, 1996 were
$119,438, representing 91.0% of FFO.
Cash Available for Distribution
Cash Available for Distribution ("CAD") is defined as FFO (as defined above)
plus depreciation on personal property, less mortgage principal payments and
recurring capital improvements. Recurring capital improvements include, but are
not limited to, carpet and flooring replacement, appliance replacements, and
electrical and plumbing fixture replacement. The Company believes that in order
to facilitate a clear understanding of its operating results, CAD should be
examined in conjunction with net income as presented in the audited financial
statements and information included elsewhere in this Report. CAD does not
represent cash generated from operating activities in accordance with generally
accepted accounting principles and is not necessarily indicative of cash
available to fund cash needs. CAD should not be considered as an alternative to
net income as an indication of the Company's performance or as an alternative to
cash flow as a measure of liquidity.
CAD increased $157,857 from $116,202 for the three months ended March 31, 1996
to $274,060 for the three months ended March 31, 1997. Dividends declared for
the three months ended March 31, 1997 were $96,600, representing 35.3% of CAD.
However, as noted above, the dividends declared for the three months ended March
31, 1997 were for a short dividend period of January 1, 1997 through March 13,
1997, and therefore the March 31, 1997 CAD payout ratio is not comparable to the
March 31, 1996 ratio. Dividends declared for the three months ended March 31,
1996 were $119,438, representing 102.8% of CAD.
Inflation
Substantially all of the leases at the properties are for a term of one year or
less, which may enable the Company to seek increased rents upon renewal or
reletting. Such short-term leases generally lessen the risk to the Company of
the potential adverse effects of inflation.
"Safe Harbor" Statement under Private Securities Litigation Reform Act of 1996
Certain statements contained in this report, and in particular in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," statements in other filings with the Securities and Exchange
Commission and statements in other public documents of the Company may be
forward looking and are subject to a variety of risks and uncertainties. Many
factors could cause actual results to differ materially from these statements.
These factors include, but are not limited to, (i) population shifts which may
increase or decrease the demand for rental housing, (ii) the value of commercial
and residential rental properties in the Northeast where all of the Company's
properties are located, in recent years, have fluctuated considerably, (iii) the
effect on the Company's properties of competition from new apartment complexes
which may be completed in proximity to such properties thereby increasing
competition, (iv) the effect of weather and other conditions which can
significantly affect property operating expenses and (v) other factors which
might be described for time to time in the Company's filings with the Securities
and Exchange Commission. In addition, the Company is subject to the effects of
changes in the general business economic conditions.
Although the Company believes that its properties will continue to be attractive
to tenants and that it will be able to control expenses, future revenue and
operating trends cannot be reliably predicted. These trends may cause the
Company to adjust its operation in the future. Factors external to the Company
can also affect the price of the Company's Common Shares. Because of the
foregoing and other factors, recent trends should not be considered reliable
indicators of future financial results or stock prices.
PART II. OTHER INFORMATION
Item 2. Change in Securities.
(a) In March 1997, the Operating Partnership entered into a three-year
Revolving Credit Facility with a bank for up to $25.0 million. The obligations
of the Operating Partnership under the Revolving Credit Facility are guaranteed
by the Company. The Revolving Credit Facility requires the Operating Partnership
to meet certain financial covenants including: (i) maintaining a debt to
tangible net worth of 1.25 to 1.0; (ii) distributing to its partners not more
than 95% of it Funds From Operations (as defined in the Revolving Credit
Facility); (iii) maintaining an aggregate minimum occupancy for the properties
securing the Revolving Credit Facility of 90%, with not less than 80% for any
single property. Compliance by the Operating Partnership with these covenants
may have the effect of limiting the amounts of income distributable by the
Operating Partnership to its partners, including the Company. A limitation on
the ability of the Operating Partnership to distribute funds to its partners
would effectively limit the ability of the Company to declare and pay dividends
on its Common Shares. Under the Revolving Credit Agreement, the Company is
nevertheless permitted to distribute at least 95% of its taxable income so that
it may continue to qualify as a REIT for federal income tax purposes.
(b) Not applicable.
(c) On March 14, 1997, the Company sold an aggregate of 3,333,333 of
its Common Shares to accredited investors (as defined in Regulation D under the
Securities Act of 1933 (the "1993 Act")) for an aggregate selling price of $30.0
million. The offer and sale of such shares was not registered under the 1933
Act. No underwriter was engaged by the Company in connection with this sale,
and, accordingly, no underwriting discounts or commissions were paid. Each of
the purchasers of shares in this offering represented to the Company that such
purchaser was an "accredited investor," as defined in Rule 501 under the 1933
Act. The offer and sale of these shares was made in reliance on Rule 506 under
the 1933 Act.
During the quarter ended March 31, 1997, the Company declared a 5%
stock dividend to its shareholders of record on March 10, 1997 and currently
effected a 1.125 to 1.0 stock split (collectively the "Stock Split") on shares
outstanding on March 10, 1997. The stock split became effective on March 14,
1997, and the stock dividend was paid on March 28, 1997. As a result of the
Stock Split, the Company issued an aggregate of 95,102 of its Common Shares.
Since these shares were issued in connection with a stock dividend and a stock
split, no "sale" or "offer for sale" occurred, and registration of these
transactions under the 1933 Act was not required.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) A special meeting of the holders of the Company's Common Shares
was held on March 10, 1997 (the "Special Meeting").
(b) Not applicable.
(c) Two matters were voted on by the holders of the Company's Common
Shares at the Special Meeting: (i) a proposal to approve amendments to the
Second Amended and Restated Declaration of Trust of the Company (A) to delete
the requirement that the Company receive an independent third party appraisal
before purchasing any property the ownership of which is controlled by the
executive officers of the Company or their affiliates, (B) to change the name of
the Company to "Grove Property Trust" and (C) to amend the "Excess Shares"
provisions to minimize the risk that the Company could fail to qualify as a REIT
for federal income tax purposes and to clarify the "Ownership Limit" as it
applies to certain executive officers of the Company and their affiliates
("Proposal No. 1") and (ii) a proposal to approve the adoption of the Company's
1996 Share Incentive Plan ("Proposal No. 2").
<PAGE>
Votes cast FOR, AGAINST, and ABSTAIN on each of these proposals at the Special
Meeting are set forth below. There were no broker non-votes on either Proposal
No. 1 or Proposal No. 2.
For Against Abstain
--- ------- -------
Proposal No. 1 354,074 13,566 1,200
Proposal No. 2 346,774 20,566 1,500
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Description
3.1 Third Amended and Restated Declaration of Trust of the Company
substantially as filed with the State of Maryland State Department of
Assessments and Taxation.
4.1 Revolving Credit Agreement dated March 26,
1997, among Grove Operating L.P., the Company
and Rhode Island Hospital Trust National Bank
(a Bank of Boston company) and Other Banks
which may become parties to the Agreement and
Rhode Island Hospital Trust National Bank, as
Agent.
27 Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter ended March 31, 1997, the Company filed three
Current Reports on Form 8-K. The first such Current Report was dated February
21, 1997 and reported information under Item 5. The second such Current Report
was dated March 14, 1997 and reported information under Item 5. The third such
Current Report also dated March 14, 1997 reported information under Item 2 and
Item 6. The Current Report on Form 8-K dated March 14, 1997 which responded to
Item 2 and Item 6 contained the following financial statements:
GROVE REAL ESTATE ASSET TRUST
Pro Forma Financial Statements (Unaudited):
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1996
Notes to Pro Forma Condensed Consolidated Balance Sheet
Pro Forma Condensed Consolidated Statements of Income for the Nine Months
Ended September 30, 1996 and Year Ended December 31, 1995
Notes to Pro Forma Condensed Consolidated Statements of Income
Historical Financial Statements:
Unaudited Balance Sheet as of September 30, 1996
Unaudited Statements of Income for the Nine Months Ended September 30, 1996
and 1995
Unaudited Statement of Changes in Shareholders' Equity for the Nine Months
Ended September 30, 1996
Unaudited Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995
Notes to the Unaudited Financial Statements
Report of Independent Auditors
Balance Sheet as of December 31, 1995
Statements of Income for the Year Ended December 31, 1995 and the period
from inception (June 24, 1994) to December 31, 1994
Statements of Shareholders' Equity for the Year Ended December 31, 1995
and the period from inception (June 24, 1994) to december 31, 1994
Statements of Cash Flows for the Year Ended December 31, 1995 and the
period from inception (June 24, 1994) to December 31, 1994
Notes to Financial Statements
<PAGE>
GROVE OPERATING, L.P.
Financial Statements:
Report of Independent Auditors
Balance Sheet as of November 4, 1996
Notes to Balance Sheet
GROVE PROPERTY SERVICES LIMITED PARTNERSHIP AND PROPERTY PARTNERSHIPS
Combined Financial Statements:
Report of Independent Auditors
Combined Balance Sheets as of September 30, 1996 (unaudited) and
December 31, 1995
Combined Statements of Income for the Nine Months Ended September 30,
1996 (unaudited) and 1995 (unaudited) and the Years Ended
December 31, 1995 and 1994
Combined Statements of Changes in Owners' Equity for the
Nine Months Ended September 30, 1996 (unaudited) and the
Years Ended December 31, 1995 and 1994
Combined Statements of Cash Flows for the
Nine Months Ended September 30, 1996 (unaudited) and 1995 (unaudited)
and the Years Ended December 31, 1995 and 1994
Notes to the Combined Financial Statements
GROVE CAMBRIDGE ASSOCIATES LIMITED PARTNERSHIP
Financial Statements:
Report of Independent Auditors
Balance Sheet as of December 31, 1995
Statement of Operations for the Years Ended December 31, 1995 and 1994
Statement of Changes in Partners' Equity (Deficit) for the Years Ended
December 31, 1995 and 1994
Statement of Cash Flows for the Years Ended December 31, 1995 and 1994
Notes to the Financial Statements
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
cause this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
REGISTRANT:
GROVE PROPERTY TRUST
Date: May 15, 1997 By: /s/Joseph R. LaBrosse
---------------------
Name: Joseph R. LaBrosse
(on behalf of the registrant and as Chief
Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Third Amended and Restated Declaration of Trust of the Company
substantially as filed with the State of Maryland State Department of
Assessments and Taxation.
4.1 Revolving Credit Agreement dated March 26,
1997, among Grove Operating L.P., the Company
and Rhode Island Hospital Trust National Bank
(a Bank of Boston company) and Other Banks
which may become parties to the Agreement and
Rhode Island Hospital Trust National Bank, as
Agent.
27 Financial Data Schedule
GROVE REAL ESTATE ASSET TRUST
THIRD AMENDED AND RESTATED
DECLARATION OF TRUST
Dated March 14, 1997
THIS THIRD AMENDED AND RESTATED DECLARATION OF TRUST is made in conformity
with the provisions of Section 12.5 hereof, as of the date set forth above by
the undersigned Trust Managers.
ARTICLE I
THE TRUST; CERTAIN DEFINITIONS
SECTION 1.1 Name. The name of the trust (the "TRUST") is:
GROVE PROPERTY TRUST
SECTION 1.2 Resident Agent. The name and address of the resident agent of
the Trust in the State of Maryland is the CT Corporation System, Maryland, 32
South Street, Baltimore, Maryland 21202. The Trust may have such offices or
places of business within or without the State of Maryland as the Trustees may
from time to time determine.
SECTION 1.3 Nature of Trust. The Trust is a real estate investment trust
within the meaning of "Title 8", defined below.
SECTION 1.4 Powers. The Trust shall have all of the powers granted to real
estate investment trusts generally by Title 8 and shall have any other and
further powers as are not inconsistent with Title 8 or other applicable law.
SECTION 1.5 Definitions. As used in this Declaration of Trust, the following
terms shall have the following meanings unless the context otherwise requires:
"AFFILIATE" or "AFFILIATED" means, as to any corporation, partnership, trust
or other association (other than the Trust), any Person (i) that holds
beneficially, directly or indirectly, 5% or more of the outstanding stock or
equity interests thereof or (ii) who is an officer, director, partner or trustee
thereof or of any Person which controls, is controlled by, or is under common
control with, such corporation, partnership, trust or other association or (iii)
which controls, is controlled by, or is under common control with, such
corporation, partnership, trust or other association.
"BOARD OF TRUST MANAGERS" means the Board of Trust Managers of the Trust.
"BYLAWS" means the Bylaws of the Trust, as amended.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DECLARATION" or "DECLARATION OF TRUST" means this Declaration Trust,
including any amendments or supplements hereto.
"EXECUTIVE OFFICERS" means Damon D. Navarro, Brian Navarro, Edmund Navarro,
Joseph LaBrosse and Gerald McNamara.
"INDEPENDENT TRUST MANAGER" means a member of the Board of Trust Managers of
the Trust which is not employed by or affiliated with the Trust or an Affiliate
of the Trust.
"PERSON" means an individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used
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exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 508(a) of the
Code, joint stock company or other entity, or any government and agency or
political subdivision thereof.
"REIT PROVISIONS OF THE CODE" means Section 856 through 860 of the Code and
any other successor provisions of the Code relating to real estate investment
trust (including provisions as to the attribution of ownership of beneficial
interests therein) and the regulations promulgated thereunder.
"SECURITIES" means Shares (defined below), any stock, shares or other
evidences of equity, beneficial or other interests, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities" or any certificates of interest, shares or
participations in, temporary or interim certificates for, receipts for,
guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire, any of the foregoing.
"SECURITIES OF THE TRUST" means any securities issued by the Trust.
"SHAREHOLDERS" means holders of record of Shares.
"SHARES" means transferable shares of beneficial interest of the Trust of
any class or series.
"TITLE 8" means Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland, or any successor statute.
"TRUST MANAGER" means, individually, an individual, and "TRUST MANAGERS"
means, collectively, the individuals, in each case, as named in Section 2.2 of
this Declaration so long as they continue in office and any and all other
individuals who have been duly elected and qualify as Trust Managers of the
Trust hereunder.
"TRUST PROPERTY" means any and all property, real, personal or otherwise,
tangible or intangible, which is transferred or conveyed to the Trust or the
Trust Managers (including all rents, income, profits and gains therefrom), which
is owned or held by, or for the account of, the Trust or the Trust Managers.
ARTICLE II
TRUST MANAGERS
SECTION 2.1 Number, Composition. The number of Trust Managers initially
shall be five, which number may thereafter be increased or decreased by the
Trust Managers then in office from time to time; however, the total number of
Trust Managers shall be not less than two and not more than 15. No reduction in
the number of Trust Managers shall cause the removal of any Trust Managers from
office prior to the expiration of his term.
At all times after the date of closing of the Initial Public Offering (as
defined herein), the composition of the Board of Trust Managers shall consist of
a majority of Independent Trust Managers.
SECTION 2.2 Term. At each Annual Meeting of Shareholders, the successors to
the class of Trust Managers whose term expires at such Meeting shall be elected
to hold office for a term expiring at the annual Meeting of Shareholders held in
the third year following the year of their election and the other Trust Managers
shall continue in office.
SECTION 2.3 Resignation, Removal or Death. Any Trust Manager may resign by
written notice to the remaining Trust Managers, effective upon execution and
delivery to the Trust of such written notice or upon any future date specified
in the notice. A Trust Manager may be removed, only with Cause (as hereinafter
defined), at a Meeting of the Shareholders called for that purpose, by the
affirmative vote of the holders of not less than two-thirds of the Shares then
outstanding and entitled to vote in the election of Trustees. As used herein,
"CAUSE" shall mean (a) material theft, fraud or embezzlement or active and
deliberate dishonesty by a Trust Manager; (b) habitual neglect of duty by a
Trust Manager having a material and adverse significance to the Trust; or (c)
the conviction of a Trust Manager of a felony or of
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any crime involving moral turpitude. Upon the incapacity, death, resignation or
removal of any Trust Manager, or his otherwise ceasing to be a Trust Manager, he
shall automatically cease to have any right, title or interest in and to the
Trust Property and shall execute and deliver such documents as the remaining
Trust Managers require for the conveyance of any Trust Property held in his
name, and shall account to the remaining Trust Managers as they require for all
property which he holds as Trust Manager.
SECTION 2.4 Legal Title. Legal title to all Trust Property shall be vested
in the Trust, but the Trust may cause legal title to any Trust Property to be
held by or in the name of any or all of the Trust Managers or any other Person
as nominee. Any right, title or interest of the Trust Managers in and to the
Trust Property shall automatically vest in successor and additional Trust
Managers upon their qualification and acceptance of election or appointment as
Trust Managers, and they shall thereupon have all the right and obligations of
Trust Managers, whether or not conveyancing documents have been executed and
delivered pursuant to Section 2.3 or otherwise. Written evidence of the
qualification and acceptance of election or appointment of successor and
additional Trust Managers may be filed with the records of the Trust and in such
other offices, agencies or places as the Trust or Trust Managers may deem
necessary or desirable.
ARTICLE III
POWERS OF TRUST MANAGERS
Subject to the express limitations herein or in the Bylaws, (1) the business
and affairs of the Trust shall be managed under the direction of the Board of
Trust Managers and (2) the Trust Managers shall have full, exclusive and
absolute power, control and authority over the Trust Property and over the
business of the Trust as if they, in their own right, were the sole owners
thereof. The Trustees may take any actions as in their sole judgment and
discretion are necessary or desirable to conduct the business of the Trust. This
Declaration of Trust shall be construed with a presumption in favor of the grant
of power and authority to the Trust Managers. Any construction of this
Declaration or determination made in good faith by the Trust Managers concerning
their powers and authority hereunder shall be conclusive. The powers of the
Trust Managers shall in no way be limited or restricted by reference to or
inference from the terms of this or any other provision of this Declaration or
construed or deemed by inference or otherwise in any manner to exclude or limit
the powers conferred upon the Trust Managers under the general laws of the State
of Maryland as now or hereafter in force.
ARTICLE IV
INVESTMENT POLICY
The fundamental investment policy of the Trust is to make investments in
such a manner as to comply with the REIT Provisions of the Code and with the
requirements of Title 8 with respect to the composition of the Trust's
investments and the derivation of its income. Subject to Section 6.7, the Trust
Managers shall use their best efforts to carry out this fundamental investment
policy and to conduct the affairs of the Trust in such a manner as to continue
to qualify the Trust for the tax treatment provided in the REIT Provisions of
the Code; PROVIDED, HOWEVER, that no Trust Manager, officer, employee or agent
of the Trust shall be liable for any action or omission resulting in the loss of
tax benefits under the Code, except to the extent provided in Section 11.2. The
Trust Managers may change from time to time, either by resolution or by
amendment to the Bylaws of the Trust, such investment policies as they determine
to be in the best interest of the Trust, including prohibitions or restrictions
upon certain types of investments.
ARTICLE V
SHARES
SECTION 5.1 Authorized Shares. The total number of Shares which the Trust
has authority to issue is 14,000,000 shares, of which 10,000,000 are Common
Shares, $.01 par value per share (each, a "COMMON SHARE" or collectively,
"COMMON SHARES"), and 4,000,000 are Preferred Shares, $.01 par value per share
(each a "PREFERRED SHARE" or collectively, "PREFERRED SHARES").
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SECTION 5.2 Common Shares. Subject to the provisions of Article VII
regarding Excess Shares (as such term is defined therein), each Common Share
shall entitle the holder thereof to one vote. Holders of Common Shares shall not
be entitled to cumulative voting.
SECTION 5.3 Preferred Shares. Preferred Shares may be issued, from time to
time, in one or more series, as authorized by the Board of Trust Managers. Prior
to issuance of Preferred Shares of each series, the Board of Trust Managers, by
resolution, shall designate that series of Preferred Shares to distinguish it
from all other series and classes of Preferred Shares, shall specify the number
of Preferred Shares to be included in the series and, subject to the provisions
of Article VII regarding Excess Shares, shall set the terms, preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption.
SECTION 5.4 Classification or Reclassification of Unissued Shares. Subject
to the express terms of any series of Preferred Shares or any class of Common
Shares outstanding at the time and notwithstanding any other provision of the
Declaration of Trust, the Board of Trust Managers may increase or decrease the
number of, alter the designation of or classify or reclassify any unissued
Shares by setting or changing, in any one or more respects, from time to time
before issuing the Shares, and subject to the provisions of Article VII
regarding Excess Shares, the terms, preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications or terms or conditions of redemption of any series or class of
Shares.
SECTION 5.5 Declaration of Trust and Bylaws. All persons who acquire Shares
shall acquire the same subject to the provisions of this Declaration of Trust
and the Bylaws.
SECTION 5.6 Exchange of OP Units. So long as the Trust remains the general
partner of Grove Operating, L.P., the board of trust managers is hereby
expressly vested with authority (subject to the restrictions on ownership,
transfer and redemption of Equity Shares set forth in Article VII hereof) to
issue, and shall issue to the extent provided in the Partnership Agreement,
Common Shares in exchange for the units into which partnership interests in
Grove Operating, L.P. ("OP Units") are divided, as the same may be adjusted, as
provided in the Partnership Agreement.
SECTION 5.7 Reservation of Shares. Pursuant to the obligations of the Trust
under the Partnership Agreement to issue Common Shares in exchange for OP Units,
the board of trust managers is hereby required to reserve and authorize for
issuance a sufficient number of authorized but unissued Common Shares to permit
the Trust to issue Common Shares in exchange for OP Units that may be exchanged
for or converted into Common Shares as provided in the Partnership Agreement.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
TRUST AND OF THE SHAREHOLDERS AND TRUST MANAGERS
SECTION 6.1 Authorization by Board of Share Issuance. The Board of Trust
Managers may authorize the issuance from time to time of Shares of any class,
whether now or hereafter authorized, or securities convertible into Shares of
any class, whether now or hereafter authorized, for such consideration as the
Board of Trust Managers may deem advisable, subject to such restrictions or
limitations, if any, as may be set forth in this Declaration of Trust or in the
Bylaws or in the general corporation laws or other laws of the State of Maryland
affecting or having application to real estate investment trusts.
SECTION 6.2 Preemptive and Appraisal Rights. Except as may be provided by
the Board of Trust Managers in authorizing the issuance of Preferred Shares
pursuant to Section 5.3, no holder of Shares shall, as such holder, (a) have any
preemptive right to purchase or subscribe for any additional Shares or any other
security of the Trust which the Trust may issue or sell or (b), except as
expressly required by Title 8, have any right to require the Trust to pay him
the fair value of his Shares in an appraisal or similar proceeding.
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SECTION 6.3 Advisor or Property Management Agreements. Subject to such
approval of the Shareholders and other conditions, if any, as may be required by
any applicable statute, rule or regulation, the Board of Trust Managers may
authorize the execution and performance by the Trust of one or more agreements
with any person, corporation, association, company, trust, partnership (limited
or general) or other organization, whether or not an Affiliate of the Trust
(each, an "ADVISOR"), whereby, subject to the supervision and control of the
Board of Trust Managers, any such Advisor shall render or make available to the
Trust managerial, investment, advisory and/or related services, office space,
and property management services, and other services and facilities (including,
if deemed advisable by the Board of Trust Managers, the management or
supervision of the investments of the Trust) upon such terms and conditions as
may be provided in such agreement or agreements (including, if deemed fair and
equitable by the Board of Trust Managers, the compensation payable thereunder by
the Trust), subject to the provisions of Section 11.6.
SECTION 6.4 Related Party Transactions.
(a) Without limiting any other procedures available by law or otherwise to
the Trust, the Board of Trust Managers may authorize any agreement of the
character described in Section 6.3 or any other transaction with any Advisor,
although one or more of the Trust Managers or officers of the Trust may be a
party to such agreement or may be an officer, director, stockholder or member of
such Advisor, and no such agreement or transaction shall be invalidated or
rendered void or voidable solely by reason of the existence of any such
relationship if the existence is disclosed or known to the Board of Trust
Managers, and the contract or transaction is approved by the Board of Trust
Managers (including the affirmative vote of a majority of the Independent Trust
Managers, even if they constitute less than a quorum of the Board). Any Trust
Manager who is also a director, officer, stockholder or member of an Advisor or
other entity with whom the Trust proposes to engage in business may be counted
in determining the existence of a quorum at any meeting of the Board of Trust
Managers considering such matter.
(b) Subsequent to the Closing Date (as defined herein), the affirmative vote
of a majority of the Independent Trust Managers (even if they constitute less
than a quorum of the Board) shall be required to approve the purchase by the
Trust or its subsidiaries of any multifamily residential or mixed-use
properties, the ownership of which is under the control, whether directly or
indirectly, of Messrs. Damon D. Navarro and Joseph R. LaBrosse or any of the
Executive Officers of the Trust, or their respective Affiliates.
SECTION 6.5 Determinations by Board. The determination as to any of the
following matters, made in good faith by, or pursuant to the direction of, the
Board of Trust Managers consistent with this Declaration of Trust and in the
absence of actual receipt of an improper benefit in money, property or services
or active and deliberate dishonesty established by a court, shall be final and
conclusive and shall be binding upon the Trust and every holder of Shares: (a)
the amount of the net income of the Trust for any period and the amount of
assets at any time legally available for the payment of dividends, redemption of
Shares or the payment of other distributions with respect to Shares; (b) the
amount of paid-in surplus, net assets, other surplus, annual or other net
profit, net assets in excess of capital, undivided profits or excess of profits
over losses on sales of assets; (c) the amount, purpose, time of creation,
increase or decrease, alteration or cancellation of any reserves or charges and
the propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged);
(d) the fair value, or any sale, bid or asked price to be applied in determining
the fair value, of any asset owned or held by the Trust; and (e) any matters
relating to the acquisition, holding and disposition of any assets by the Trust.
The affirmative vote of a majority of the Independent Trust Managers, even
if they constitute less than a quorum, shall be required to approve any and all
matters for which approval by the Board of Trust Managers is required by this
Declaration of Trust.
SECTION 6.6 Reserved Powers of Board. The enumeration and definition of
powers of the Board of Trust Managers included in this Article VI shall in no
way be limited or restricted by reference to or inference from the terms of any
other clause of this or any other provision of the Declaration of Trust, or
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construed or deemed by inference or otherwise in any manner to exclude or limit
the powers conferred upon the Board of Trust Managers under the general laws of
the State of Maryland as now or hereafter in force.
SECTION 6.7 REIT Qualification. The Board of Trust Managers shall use its
reasonable best efforts to cause the Trust and the Shareholders to qualify for
federal income tax treatment in accordance with the REIT Provisions of the Code.
In furtherance of the foregoing, the Board of Trust Managers shall use its
reasonable best efforts to take such actions as are necessary, and may take such
actions as in its sole judgment and discretion are desirable, to preserve the
status of the Trust as a REIT, including amending the provisions of this
Declaration of Trust as provided in Article IX; provided, however, that if the
Board of Trust Managers determines that it is no longer in the best interests of
the Trust for it to continue to qualify as a REIT, the Board of Trust Managers
may revoke or otherwise terminate the Trust's REIT election.
ARTICLE VII
RESTRICTIONS ON OWNERSHIP AND TRANSFER
TO PRESERVE TAX BENEFIT
SECTION 7.1 Definitions. For the purposes of this Article VII, the following
terms shall have the following meanings:
"BENEFICIAL OWNERSHIP" shall mean ownership of Equity Shares by a Person who
is or would be treated as an owner of such Equity Shares either actually or
constructively through the application of Section 544 of the Code, as modified
by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially
Own," "Beneficially Owns" and "Beneficially Owned" shall have the correlative
meanings.
"CHARITABLE BENEFICIARY" shall mean one or more beneficiaries of a Special
Trust as determined pursuant to Section 7.3(f) of this Article VII.
"CLOSING DATE" shall mean the time and date of the payment for and delivery
of Common Shares issued pursuant to the Initial Public Offering.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute.
"CONSTRUCTIVE OWNERSHIP" shall mean ownership of Equity Shares by a Person
who is or would be treated as an owner of such Equity Shares either actually or
constructively through the application of Section 318 of the Code, as modified
by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Own," "Constructively Owns" and "Constructively Owned" shall
have the correlative meanings.
"DEFERRED STOCK GRANT" means a grant, pursuant to the Trust's 1996 Share
Incentive Plan of Common Shares.
"EQUITY SHARES" shall mean Common Shares and/or Preferred Shares.
"EXECUTIVE OFFICERS" shall mean Damon Navarro, Brian Navarro, Edmund
Navarro, Joseph LaBrosse and Gerald McNamara.
"EXECUTIVE OFFICER OWNERSHIP LIMIT" means 20% (by value or by number of
Shares, whichever is more restrictive) of the outstanding Equity Shares of the
Trust.
"INITIAL PUBLIC OFFERING" shall mean the sale of Common Shares pursuant to
the Trust's first effective registration statement for such Common Shares filed
under the Securities Act of 1933, as amended, on Form SB-2 in June 1994.
"IRS" means the United States Internal Revenue Service.
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"MARKET PRICE" shall mean the last reported sales price reported on the
Emerging Company Marketplace of the American Stock Exchange, Inc. (the "AMEX"),
or otherwise on the AMEX, of the Common Shares, or Preferred Shares, as the case
may be, on the trading day immediately preceding the relevant date, or if not
then traded on the AMEX, the last reported sales price of the Common Shares, or
Preferred Shares, as the case may be, on the trading day immediately preceding
the relevant date as reported on any exchange or quotation system over which the
Common Shares, or Preferred Shares, as the case may be, may be traded, or if not
then traded over any exchange or quotation system, then the market price of the
Common Shares, or Preferred Shares, as the case may be, on the relevant date as
determined in good faith by the Board of Trust Managers.
"OPTION" means an option, granted pursuant to the Trust's 1994 Share Option
Plan or 1996 Share Incentive Plan, to acquire Common Shares.
"OWNERSHIP LIMIT" shall mean 5.0% (by value or by number of shares,
whichever is more restrictive) of the outstanding Equity Shares of the Trust.
"PARTNERSHIP AGREEMENT" shall mean the Agreement of Limited Partnership of
Grove Operating, L.P., of which the Trust is the sole general partner, dated as
of , 1996, as such agreement may be amended from time to time.
"PERSON" shall mean an individual, corporation, partnership, limited
liability company, estate, trust (including a trust qualified under Section
401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside
for or to be used exclusively for the purposes described in Section 642(c) of
the Code, association, private foundation within the meaning of Section 509(a)
of the Code, joint stock company or other entity; but does not include an
underwriter acting in a capacity as such in a public offering of the Common
Shares, or Preferred Shares, as the case may be, provided that the ownership of
Common Shares, or Preferred Shares, as the case may be, by such underwriter
would not result in the Trust being "closely held" within the meaning of Section
856(h) of the Code, or otherwise result in the Trust failing to qualify as a
REIT.
"PURPORTED BENEFICIAL TRANSFEREE" shall mean, with respect to any purported
Transfer which results in a transfer to a Special Trust, as provided in Section
7.2(b) of this Article VII, the purported beneficial transferee or owner for
whom the Purported Record Transferee would have acquired or owned Equity Shares,
if such Transfer had been valid under Section 7.2(a) of this Article VII.
"PURPORTED RECORD TRANSFEREE" shall mean, with respect to any purported
Transfer which results in a transfer to a Special Trust, as provided in Section
7.2(b) of this Article VII, the record holder of the Equity Shares if such
Transfer had been valid under Section 7.2(a) of this Article VII.
"REIT" shall mean a real estate investment trust under Sections 856 through
860 of the Code.
"RESTRICTION TERMINATION DATE" shall mean the first day after the Closing
Date on which the Board of Trust Managers determines that it is no longer in the
best interests of the Trust to attempt to, or continue to, qualify as a REIT.
"SPECIAL TRUST" shall mean each of the trusts provided for in Section 7.3 of
this Article VII.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or other
disposition of Equity Shares, including (i) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
Equity Shares or (ii) the sale, transfer, assignment or other disposition of any
securities (or rights convertible into or exchangeable for Equity Shares),
whether voluntary or involuntary, whether of record or beneficially or
Beneficially or Constructively (including but not limited to transfers of
interests in other entities which result in changes in Beneficial or
Constructive Ownership of Equity Shares), and whether by operation of law or
otherwise.
"TRUSTEE" shall mean any Person unaffiliated with the Trust, the Purported
Beneficial Transferee, and the Purported Record Transferee, that is appointed by
the Trust to serve as trustee of a Special Trust.
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Section 7.2 Restrictions on Ownership and Transfers.
(a) From the Closing Date and prior to the Restriction Termination Date:
(i) except as provided in Section 7.9 of this Article VII, (i) no Person
(other than an Executive Officer) shall Beneficially Own Equity Shares in
excess of the Ownership Limit and (ii) no Executive Officer shall, nor shall
all of the Executive Officers, in the aggregate, Beneficially Own Equity
Shares in excess of the Executive Officer Ownership Limit;
(ii) except as provided in Section 7.9 of this Article VII, no Person
shall Constructively Own in excess of 9.8% (by value or by number of shares,
whichever is more restrictive) of the outstanding Equity Shares of the
Trust; and
(iii) no Person shall Beneficially or Constructively Own Equity Shares
to the extent that such Beneficial or Constructive Ownership would result in
the Trust being "closely held" within the meaning of Section 856(h) of the
Code, or otherwise failing to qualify as a REIT (including, but not limited
to, ownership that would result in the Trust owning (actually or
Constructively) an interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the Trust (either directly
or indirectly through one or more partnerships) from such tenant would cause
the Trust to fail to satisfy any of the gross income requirements of Section
856(c) of the Code).
(b) If, during the period commencing on the Closing Date and prior to the
Restriction Termination Date, any Transfer (whether or not such Transfer is the
result of a transaction entered into through the facilities of the AMEX) or
other event occurs that, if effective, would result in any Person Beneficially
or Constructively Owning Equity Shares in violation of Section 7.2(a) of this
Article VII, (i) then that number of Equity Shares that otherwise would cause
such Person to violate Section 7.2(a) of this Article VII (rounded up to the
nearest whole share) shall be automatically transferred to a Special Trust for
the benefit of a Charitable Beneficiary, as described in Section 7.3, effective
as of the close of business on the business day prior to the date of such
Transfer or other event, and such Purported Beneficial Transferee shall
thereafter have no rights in such Equity Shares or (ii) if, for any reason, the
transfer to a Special Trust described in clause (i) of this sentence is not
automatically effective as provided therein to prevent any Person from
Beneficially or Constructively Owning Equity Shares in violation of Section
7.2(a) of this Article VII, then the Transfer of that number of Equity Shares
that otherwise would cause any Person to violate Section 7.2(a) shall be void AB
INITIO, and the Purported Beneficial Transferee shall have no rights in such
Equity Shares.
(c) Subject to Section 7.12 of this Article and notwithstanding any other
provisions contained herein, during the period commencing on the Closing Date
and prior to the Restriction Termination Date, any Transfer of Equity Shares
(whether or not such Transfer is the result of a transaction entered into
through the facilities of the AMEX) that, if effective, would result in the
capital stock of the Trust being beneficially owned by less than 100 Persons
(determined without reference to any rules of attribution) shall be void AB
INITIO, and the intended transferee shall acquire no rights in such Equity
Shares.
(d) It is expressly intended that the restrictions on ownership and Transfer
described in this Section 7.2 of Article VII shall apply to the
redemption/exchange rights provided in Section of the Partnership Agreement.
Notwithstanding any of the provisions of the Partnership Agreement or any other
agreement between Grove Operating, L.P. and any of its partners to the contrary,
a partner of Grove Operating, L.P. shall not be entitled to effect an exchange
of an interest in Grove Operating, L.P. for Equity Shares to the extent the
actual or beneficial or Beneficial or Constructive ownership of such Equity
Shares would be prohibited under the provisions of this Article VII.
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SECTION 7.3 Transfers of Equity Shares in Trust
(a) Upon any purported Transfer or other event described in Section 7.2(b)
of this Article VII, such Equity Shares shall be deemed to have been transferred
to the Trustee in his capacity as trustee of a Special Trust for the exclusive
benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee
shall be deemed to be effective as of the close of business on the business day
prior to the purported Transfer or other event that results in a transfer to a
Special Trust pursuant to Section 7.2(b). The Trustee shall be appointed by the
Trust and shall be a Person unaffiliated with the Trust, any Purported
Beneficial Transferee, and any Purported Record Transferee. Each Charitable
Beneficiary shall be designated by the Trust as provided in Section 7.3(f) of
this Article VII.
(b) Equity Shares held by the Trustee shall be issued and outstanding Common
Shares or Preferred Shares of the Trust, as the case may be. The Purported
Beneficial Transferee or Purported Record Transferee shall have no rights in the
Equity Shares held by the Trustee. The Purported Beneficial Transferee or
Purported Record Transferee shall not benefit economically from ownership of any
Equity Shares held in trust by the Trustee, shall have no rights to dividends
and shall not possess any rights to vote or other rights attributable to the
Equity Shares held in a Special Trust.
(c) The Trustee shall have all voting rights and rights to dividends with
respect to Equity Shares held in a Special Trust, which rights shall be
exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend
or distribution paid prior to the discovery by the Trust that the Equity Shares
have been transferred to the Trustee shall be paid to the Trustee upon demand,
and any dividend or distribution declared but unpaid shall be paid when due to
the Trustee with respect to such Equity Shares. Any dividends or distributions
so paid over to the Trustee shall be held in trust for the Charitable
Beneficiary. The Purported Record Transferee and Purported Beneficial Transferee
shall have no voting rights with respect to the Equity Shares held in a Special
Trust and, subject to Maryland law, effective as of the date the Equity Shares
have been transferred to the Trustee, the Trustee shall have the authority (at
the Trustee's sole discretion) (i) to rescind as void any vote cast by a
Purported Record Transferee with respect to such Equity Shares prior to the
discovery by the Trust that the Equity Shares have been transferred to the
Trustee and (ii) to recast such vote in accordance with the desires of the
Trustee acting for the benefit of the Charitable Beneficiary; PROVIDED, however,
that if the Trust has already taken irreversible action, then the Trustees shall
not have the authority to rescind and recast such vote. Notwithstanding the
provisions of this Article VII, until the Trust has received notification that
the Equity Shares have been transferred into a Special Trust, the Trust shall be
entitled to rely on its share transfer and other stockholder records for
purposes of preparing lists of stockholders entitled to vote at meetings,
determining the validity and authority of proxies and otherwise conducting votes
of stockholders.
(d) Within 20 days of receiving notice from the Trust that Equity Shares
have been transferred to a Special Trust, the Trustee of a Special Trust shall
sell the Equity Shares held in a Special Trust to a person, designated by the
Trustee, whose ownership of the Equity Shares will not violate the ownership
limitations set forth in Section 7.2(a). Upon such sale, the interest of the
Charitable Beneficiary in the Equity Shares sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Purported Record Transferee
and to the Charitable Beneficiary as provided in this Section 7.3(d). The
Purported Record Transferee shall receive the lesser of (i) the price paid by
the Purported Record Transferee for the Equity Shares in the transaction that
resulted in such transfer to the Special Trust (or, if the event which resulted
in the transfer to the Special Trust did not involve a purchase of such Equity
Shares at Market Price, the Market Price of such Equity Shares on the day of the
event which resulted in the transfer of the Equity Shares to the Special Trust)
and (ii) the price per share received by the Trustee (net of any commissions and
other expenses of sale) from the sale or other disposition of the Equity Shares
held in the Special Trust. Any net sales proceeds in excess of the amount
payable to the Purported Record Transferee shall be immediately paid to the
Charitable Beneficiary together with any dividends or other distributions
thereon. If, prior to the discovery by the Trust that such Equity Shares have
been transferred to the Trustee, such Equity Shares are sold by a Purported
Record Transferee then (i) such Equity Shares shall be deemed to
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have been sold on behalf of the Special Trust and (ii) to the extent that the
Purported Record Transferee received an amount for such Equity Shares that
exceeds the amount that such Purported Record Transferee was entitled to receive
pursuant to this subparagraph (3)(d), such excess shall be paid to the Trustee
upon demand.
(e) Equity Shares transferred to the Trustee shall be deemed to have been
offered for sale to the Trust, or its designee, at a price per share equal to
the lesser of (i) the price paid by the Purported Record Transferee for the
Equity Shares in the transaction that resulted in such transfer to a Special
Trust (or, if the event which resulted in the transfer to a Special Trust did
not involve a purchase of such Equity Shares at Market Price, the Market Price
of such Equity Shares on the day of the event which resulted in the transfer of
the Equity Shares to a Special Trust) and (ii) the Market Price on the date the
Trust, or its designee, accepts such offer. The Trust shall have the right to
accept such offer until the Trustee has sold the Equity Shares held in a Special
Trust pursuant to Section 7.3(d). Upon such a sale to the Trust, the interest of
the Charitable Beneficiary in the Equity Shares sold shall terminate and the
Trustee shall distribute the net proceeds of the sale to the Purported Record
Transferee and any dividends or other distributions held by the Trustee with
respect to such Equity Shares shall thereupon be paid to the Charitable
Beneficiary.
(f) By written notice to the Trustee, the Trust shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the interest in a
Special Trust such that (i) the Equity Shares held in a Special Trust would not
violate the restrictions set forth in Section 7.2(a) in the hands of such
Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization
described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
SECTION 7.4 Remedies for Breach. If the Board of Trust Managers, or a
committee thereof (or other designees if permitted by Maryland law) shall at any
time determine in good faith that a Transfer or other event has taken place in
violation of Section 7.2 of this Article VII or that a Person intends to
acquire, has attempted to acquire or may acquire beneficial ownership
(determined without reference to any rules of attribution), Beneficial Ownership
or Constructive Ownership of any Equity Shares of the Trust in violation of
Section 7.2 of this Article VII, the Board of Trust Managers, or a committee
thereof (or other designees if permitted by Maryland law) shall take such action
as it deems advisable to refuse to give effect to or to prevent such Transfer,
including, but not limited to, causing the Trust to redeem Equity Shares,
refusing to give effect to such Transfer on the books of the Trust or
instituting proceedings to enjoin such Transfer; PROVIDED, however, that any
Transfers (or, in the case of events other than a Transfer, ownership or
Constructive Ownership or Beneficial Ownership) in violation of Section 7.2(a)
of this Article VII, shall automatically result in the transfer to a Special
Trust as described in Section 7.2(b) and any Transfer in violation of Section
7.2(c) shall automatically be void AB INITIO, irrespective of any action (or
non-action) by the Board of Trust Managers.
SECTION 7.5 Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire Equity Shares in violation of Section 7.2 of this Article
VII or any Person who is a Purported Transferee such that an automatic transfer
to a Special Trust results under Section 7.2(b) of this Article VII, shall
immediately give written notice to the Trust of such event and shall provide to
the Trust such other information as the Trust may request in order to determine
the effect, if any, of such Transfer or attempted Transfer on the Trust's status
as a REIT.
SECTION 7.6 Owners Required to Provide Information. From the Closing Date
and prior to the Restriction Termination Date:
(a) Each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Equity Shares and each Person (including the shareholder
of record) who is holding Equity Shares for a beneficial owner or Beneficial
Owner or Constructive Owner shall, on demand, be required to disclose to the
Trust in writing such information as the Trust may request in order to determine
the effect, if any, of such shareholder's actual and constructive ownership of
Equity Shares on the the Trust's status as a REIT and
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to ensure compliance with the Ownership Limit, the Executive Officer Ownership
Limit, or such other limit as provided from time to time in this Third Amended
and Restated Declaration of Trust or as otherwise permitted by the Board of
Trust Managers.
(b) Each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Equity Shares and each Person (including the Shareholder
of record) who is holding Equity Shares for a beneficial owner or Beneficial
Owner or Constructive Owner shall, on demand, provide to the Trust a completed
questionnaire containing the information regarding their ownership of such
Equity Shares, as set forth in the regulations (as in effect from time to time)
of the U.S. Department of Treasury under the Code.
SECTION 7.7 Remedies Not Limited. Nothing contained in this Article VII (but
subject to Sections 6.7 and 7.12 of the Charter) shall limit the authority of
the Board of Trust Managers to take such other action as it deems necessary or
advisable to protect the Trust and the interests of its shareholders by
preservation of the Trust's status as a REIT.
SECTION 7.8 Ambiguity. In the case of an ambiguity in the application of any
of the provisions of Sections 7.2 through 7.9, 7.13 and 7.14 of this Article
VII, including any definition contained in Section 7.1, the Board of Trust
Managers shall have the power to determine the application of the provisions of
Sections 7.2 through 7.9, 7.13 and 7.14 with respect to any situation based on
the facts known to it (subject, however, to the provisions of Section 7.12 of
this Article). In the event any of Sections 7.2 through 7.9, 7.13 or 7.14
requires an action by the Board of Trust Managers and this Third Amended and
Restated Declaration of Trust fails to provide specific guidance with respect to
such action, the Board of Trust Managers shall have the power to determine the
action to be taken so long as such action is not contrary to the provisions of
such Sections 7.2 through 7.9 of this Article VII. Absent a decision to the
contrary by the Board of Trust Managers (which the Board of Trust Managers may
make in its sole and absolute discretion), if a Person would have (but for the
remedies set forth in Section 7.2(b)) acquired Beneficial or Constructive
Ownership of Equity Shares in violation of Section 7.2(a), such remedies (as
applicable) shall apply first to the Equity Shares which but for such remedies,
would have been actually owned by such Person, and second to Equity Shares
which, but for such remedies, would have been Beneficially Owned or
Constructively Owned (but not actually owned) by such Person, PRO RATA among the
Persons who actually own such Equity Shares based upon the relative number of
the Equity Shares held by each such Person.
SECTION 7.9 Exceptions.
(a) Subject to Section 7.2(a)(iii), the Board of Trust Managers, in its sole
discretion, may exempt a Person from the limitation on a Person Beneficially
Owning Equity Shares in excess of the Ownership Limit or the Executive Officers
Beneficially Owning Equity Shares, in the aggregate, in excess of the Executive
Officer Ownership Limit, as the case may be, if the Board of Trust Managers
obtains such representations and undertakings from such Person or from such
Executive Officer or Executive Officers as are reasonably necessary to ascertain
that no individual's Beneficial Ownership or the Executive Officers' Beneficial
Ownership, in the aggregate, as the case may be, of such Equity Shares will
violate the Ownership Limit or the Executive Officer Ownership, as the case may
be, or that any such violation will not cause the Trust to fail to qualify as a
REIT under the Code, and agrees that any violation of such representations or
undertaking (or other action which is contrary to the restrictions contained in
Section 7.2 of this Article VII) or attempted violation will result in such
Equity Shares being transferred to a Special Trust in accordance with Section
7.2(b) of this Article VII.
(b) Subject to Section 7.2(a)(iii), the Board of Trust Managers, in its sole
discretion, may exempt a Person from the limitation on a Person Constructively
Owning Equity Shares in excess of 9.8% (by value or by number of Equity Shares,
whichever is more restrictive) of the outstanding Equity Shares of the Trust, if
such Person does not, and represents that it will not own, actually or
Constructively, an interest in a tenant of the Trust (or a tenant of any entity
owned in whole or in part by the Trust) that would cause the Trust to own,
actually or Constructively, more than a 9.8% interest (as set forth in Section
856(d)(2)(B) of the Code) in such tenant and the Trust obtains such
representations and undertakings from such Person as are
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reasonably necessary to ascertain this fact and agrees that any violation or
attempted violation will result in such Equity Shares being transferred to the
Trust in accordance with Section 7.2(b) of this Article VII. Notwithstanding the
foregoing, the inability of a Person to make the certification described in this
Section 7.9(b) shall not prevent the Board of Trust Managers, in its sole
discretion, from exempting such Person from the limitation on a Person
Constructively Owning Equity Shares in excess of 9.8% of the outstanding Equity
Shares if the Board of Trust Managers determines that the resulting application
of Section 856(d)(2)(B) of the Code would affect the characterization of less
than 0.5% of the gross income (as such term is used in Section 856(c)(2) of the
Code) of the Trust in any taxable year, after taking into account the effect of
this sentence with respect to all other Equity Shares to which this sentence
applies.
(c) Prior to granting any exception pursuant to Section 7.9(a) or (b) of
this Article VII, the Board of Trust Managers may require a ruling from the
Internal Revenue Service, or an opinion of counsel, in either case in form and
substance satisfactory to the Board of Trust Managers in its sole discretion, as
it may deem necessary or advisable in order to determine or ensure the Trust's
status as a REIT.
SECTION 7.10 Legends. Each certificate for Equity Shares shall bear
substantially the following legends:
CLASS OF STOCK
"THE TRUST IS AUTHORIZED TO ISSUE CAPITAL STOCK OF MORE THAN ONE CLASS,
CONSISTING OF COMMON STOCK AND ONE OR MORE CLASSES OF PREFERRED STOCK.
THE BOARD OF TRUST MANAGERS IS AUTHORIZED TO DETERMINE THE PREFERENCES,
LIMITATIONS AND RELATIVE RIGHTS OF ANY CLASS OF THE PREFERRED STOCK
BEFORE THE ISSUANCE OF SHARES OF SUCH CLASS OF PREFERRED STOCK. THE TRUST
WILL FURNISH, WITHOUT CHARGE, TO ANY STOCKHOLDER MAKING A WRITTEN REQUEST
THEREFOR, A COPY OF THE TRUST'S CHARTER AND A WRITTEN STATEMENT OF THE
DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES, CONVERSION OR OTHER RIGHTS,
VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER
DISTRIBUTIONS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF
THE STOCK OF EACH CLASS WHICH THE CORPORATION HAS THE AUTHORITY TO ISSUE
AND, IF THE CORPORATION IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL
CLASS AND SERIES, (i) THE DIFFERENCES IN THE RELATIVE RIGHTS AND
PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE EXTENT SET, AND (ii)
THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET SUCH RIGHTS AND
PREFERENCES OF SUBSEQUENT SERIES. REQUESTS FOR SUCH WRITTEN STATEMENT MAY
BE DIRECTED TO THE SECRETARY OF THE TRUST AT ITS PRINCIPAL OFFICE."
RESTRICTION ON OWNERSHIP AND TRANSFER
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE OF THE
TRUST'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUBJECT TO
CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE
TRUST'S CHARTER, (I)(A) NO PERSON (EXCEPT FOR AN EXECUTIVE OFFICER) MAY
BENEFICIALLY OWN IN EXCESS OF 5.0% OF THE
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OUTSTANDING EQUITY SHARES OF THE TRUST (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) AND (B) NO EXECUTIVE OFFICER MAY, NOR MAY
THE EXECUTIVE OFFICERS, IN THE AGGREGATE, BENEFICIALLY OWN IN EXCESS OF
20% OF THE OUTSTANDING EQUITY SHARES OF THE TRUST (BY VALUE OR BY NUMBER
OF SHARES, WHICHEVER IS MORE RESTRICTIVE); (II) NO PERSON MAY
CONSTRUCTIVELY OWN IN EXCESS OF 9.8% OF THE OUTSTANDING EQUITY SHARES OF
THE TRUST (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE
RESTRICTIVE); (III) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
EQUITY SHARES THAT WOULD RESULT IN THE TRUST BEING "CLOSELY HELD" UNDER
SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE TRUST TO FAIL TO
QUALIFY AS A REIT; AND (IV) NO PERSON MAY TRANSFER EQUITY SHARES IF SUCH
TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE TRUST BEING OWNED BY
FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY
OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN EQUITY SHARES
WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN
EQUITY SHARES IN EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY
THE TRUST. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE EQUITY SHARES REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A SPECIAL TRUST FOR THE BENEFIT OF ONE OR
MORE CHARITABLE BENEFICIARIES. IN ADDITION, THE TRUST MAY REDEEM SHARES
UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF TRUST MANAGERS IN
ITS SOLE DISCRETION IF THE BOARD OF TRUST MANAGERS DETERMINES THAT
OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS
DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS,
ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY
BE VOID AB INITIO. ALL TERMS IN THIS LEGEND THAT ARE DEFINED IN THE
DECLARATION OF TRUST HAVE THE MEANINGS ASCRIBED TO THEM IN THE
DECLARATION OF TRUST OF THE TRUST, AS THE SAME MAY BE AMENDED FROM TIME
TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND
OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF EQUITY SHARES ON REQUEST
AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE
SECRETARY OF THE TRUST, AT THE TRUST'S PRINCIPAL OFFICE."
SECTION 7.11 Severability. If any provision of this Article VII or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
SECTION 7.12 AMEX. Nothing in this Article VII shall preclude the settlement
of any transaction entered into through the facilities of the AMEX or any other
national securities exchange. The fact that the settlement of any transaction is
so permitted shall not negate the effect of any other provision of this Article
VII and any transferee in such a transaction shall be subject to all the
provisions and limitations of this Article VII.
SECTION 7.13 Changes In Ownership Limit and Executive Officer Ownership
Limit. Subject to the limitations provided in Section 7.14, the Board of Trust
Managers may from time to time increase (or
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decrease) the Ownership Limit and/or the Executive Officer Ownership Limit
(including, but not limited to, in connection with the grant of Options and/or
Deferred Stock Grants to the Executive Officers).
SECTION 7.14 Limitations on Changes In the Ownership Limit and the Executive
Officer Ownership Limit.
(a) Neither the Ownership Limit nor the Executive Officer Ownership Limit
may be increased if, as a result of such increase, five Beneficial Owners of
Equity Shares (including all of the Executive Officers) could Beneficially Own,
in the aggregate, more than 50.0% (in number or value, whichever is more
restrictive) of the then outstanding Equity Shares.
(b) Prior to the modification of the Ownership Limit or the Executive
Officer Ownership Limit pursuant to Section 7.13, the Board of Trust Managers
may require such opinions of counsel, affidavits, undertakings or agreements as
it may deem necessary or advisable in order to determine or ensure the Trust's
status as a REIT.
(c) The Executive Officer Ownership Limit shall not be reduced to a
percentage which is less than the Ownership Limit.
ARTICLE VIII
SHAREHOLDERS
SECTION 8.1 Meetings of Shareholders. There shall be an Annual Meeting of
the Shareholders, to be held at such time and place as shall be determined by or
in the manner prescribed in Article II of the Bylaws, at which Trust Managers
shall be elected and any other proper business may be conducted. Except as
otherwise provided in this Declaration of Trust, special meetings of
Shareholders may be called in the manner provided in Article II of the Bylaws.
If there are no Trust Managers, the President or any other officer of the Trust
shall promptly call a special meeting of the Shareholders entitled to vote for
the election of successor Trust Managers. Any meeting may be adjourned and
reconvened as the Trust Managers determine or as provided in Article II of the
Bylaws.
SECTION 8.2 Voting Rights of Shareholders. Subject to the provisions of any
class or series of Shares then outstanding, the Shareholders shall be entitled
to vote only on the following matters: (a) the election or removal of Trust
Managers; (b) the amendment of this Declaration of Trust; (c) the voluntary
dissolution or termination of the Trust; (d) the reorganization of the Trust;
and (e) the merger or consolidation of the Trust or the sale or other
disposition of all or substantially all of the Trust Property. Except with
respect to the foregoing matters, no action taken by the Shareholders at any
meeting shall in any way bind the Trust Managers.
ARTICLE IX
AMENDMENT
SECTION 9.1 By Shareholders. Except as provided in Section 9.2 hereof, this
Declaration of Trust may be amended only by the affirmative vote of the holders
of not less than two-thirds of all the Shares then outstanding and entitled to
vote on the matter.
SECTION 9.2 By Trust Managers. The Trust Managers, by a two-thirds vote, may
amend provisions of this Declaration of Trust from time to time to enable the
Trust to qualify as a real estate investment trust under the Code or under Title
8.
SECTION 9.3 No Other Amendment. This Declaration of Trust may not be amended
except as provided in this Article IX.
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ARTICLE X
DURATION OF TRUST
The Trust shall continue perpetually unless terminated pursuant to any
applicable provision of Title 8. The Trust may be voluntarily dissolved or
reorganized or its existence terminated only by the affirmative vote of the
holders of not less than two-thirds of all the Shares then outstanding and
entitled to vote on the matter. The Trust may sell or otherwise dispose of all
or substantially all of the Trust Property only by the affirmative vote of the
holders entitled to vote on the matter.
ARTICLE XI
LIABILITY OF SHAREHOLDERS, TRUST MANAGERS, OFFICERS,
EMPLOYEES AND AGENTS
AND TRANSACTIONS BETWEEN THEM AND THE TRUST
SECTION 11.1 Limitation of Shareholder Liability. No Shareholder shall be
liable for any debt, claim, demand, judgment or obligation of any kind of,
against or with respect to the Trust by reason of his being a Shareholder, nor
shall any Shareholder be subject to any personal liability whatsoever, in tort,
contract or otherwise, to any Person in connection with the Trust Property or
the affairs of the Trust.
SECTION 11.2 Limitation of Trust Manager and Executive Officer Liability. To
the maximum extent that Maryland law in effect from time to time permits
limitations of the liability of trustees and officers of a real estate
investment trust, no Trust Manager or officer of the Trust shall be liable to
the Trust or to any Shareholder for money damages. Neither the amendment nor
repeal of this Section, nor the adoption or amendment of any other provision of
this Declaration of Trust inconsistent with this section, shall apply to or
affect in any respect the applicability of the preceding sentence with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption. In the absence of any Maryland statute limiting the liability of
trustees and officers of a Maryland real estate investment trust for money
damages in a suit by or on behalf of the Trust or by any Shareholder, no Trust
Manager or Executive Officer of the Trust shall be liable to the Trust or to any
Shareholder unless (a) that Trust Manager or Executive Officer actually received
an improper benefit or profit in money, property or services, and then, for the
amount of the benefit of profit in money or services actually received or (b) a
judgment or other final adjudication adverse to the Trust Manager or Executive
Officer is entered in a proceeding based on a finding in the proceeding that the
Trust Manager's or Executive Officer's action or failure to act was the result
of active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding or (c) otherwise, in accordance with the
provisions of an indemnification agreement between any of them and the Trust.
SECTION 11.3 Express Exculpatory Clauses in Instruments. Neither the
Shareholders nor the Trust Managers, Executive Officers, employees or agents of
the Trust shall be liable under any written instrument creating an obligation of
the Trust, and all Persons shall look solely to the Trust Property for the
payment of any claim under or for the performance of the instrument. The
omission of the foregoing exculpatory clause in such instrument shall not render
any Shareholder, Trust Manager, Executive Officer, employee or agent liable
thereunder to any third party, nor shall the Trust Manager or any officers,
employees or agents of the Trust be liable to anyone for such omission. In the
event of a conflict between the terms of this Declaration and any
indemnification agreement, the terms of the indemnification agreement shall
control.
SECTION 11.4 Indemnification and Advance for Expenses. The Trust shall have
the power, to the maximum extent permitted by Maryland law in effect from time
to time, to obligate itself to indemnify, and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to, (a) any individual
who is a present or former Shareholder, Trust Manager or officer of the Trust or
(b) any individual who, while a Shareholder, Trust Manager or officer of the
Trust and at the express request of the Trust, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or
I-15
<PAGE>
any other enterprise as a director, officer, Shareholder, partner or trustee of
such corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, from and against all claims and liabilities to which such
person may become subject and against all claims and liabilities to which such
person may become subject by reason of his being or having been a Shareholder,
Trust Manager or Executive Officer. The Trust shall have the power, with the
approval of its Board of Trust Managers, to provide such indemnification and
advancement of expenses to a person who served a predecessor of the Trust in any
of the capacities described in (a) or (b) above and to any employee or agent of
the Trust or a predecessor of the Trust.
SECTION 11.5 Transactions Between the Trust and its Trust Managers,
Executive Officers, Employees and Agents. Subject to any express restriction in
this Declaration of Trust, including, but not limited to, Section 6.4, any
restriction adopted by the Trust Managers in the Bylaws or by resolution, and in
accordance with the terms and provisions of any employment agreement and/or
non-competition agreement with any Trust Manager or Executive Officer and the
Trust, as applicable, the Trust may enter into any contract or transaction of
any kind (including, without limitation, for the purchase or sale of property or
for any type of services, including those in connection with the underwriting or
the offer or sale of Securities of the Trust) with any Person, including any
Trust Manager, Executive Officer, employee or agent of the Trust, whether or not
any of them has a financial interest in such transaction.
SECTION 11.6 Limitation on Total Operating Expenses. The Total Operating
Expenses of the Trust shall not exceed the greater of 2% of its average invested
assets or 25% of its net income in any fiscal year as defined below. The Trust
Managers will limit operating expenses to these levels unless a majority of the
Independent Trust Managers make a finding that, based on unusual or
non-recurring factors, a higher level of expenses is justified for that year.
Written records and supporting data shall be maintained by the Trust Managers in
this regard.
Within 60 days after the end of any fiscal quarter in which Total Operating
Expenses for the preceding twelve (12) months exceeded this limitation, the
Trust will disclose this fact to the Shareholders, together with an explanation
of the factors upon which the Independent Trust Managers relied in approving
higher operating expenses.
For purposes of this Section 11.6, "TOTAL OPERATING EXPENSES" shall include
all cash operating expenses, including additional expenses paid directly or
indirectly by the Trust to its Affiliates or third parties based upon their
relationship with the Trust, including loan administration, servicing,
engineering, inspection and all other expenses paid by the Trust, except the
expenses related to raising capital, for interest, taxes and direct property
acquisition, operation, maintenance and management costs.
"AVERAGE INVESTED ASSETS", for purposes of this Section 11.6, for any
period, shall mean the average of the aggregate book value of the assets of the
Trust, invested, directly or indirectly, in equity interests and in loans
secured by real estate, before reserves for depreciation or bad debts or other
similar non-cash reserves computed by taking the average of such values at the
end of each month during such period.
"NET INCOME", for purposes of the calculation contained in this Section
11.6, shall mean total revenues applicable to such period, other than additions
to reserves for depreciation or bad debts or other similar non-cash reserves.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Governing Law. This Third Amended and Restated Declaration of
Trust is executed by the Trust Managers and delivered in the State of Maryland
with reference to the laws thereof, and the rights of all parties and the
validity, construction and effect of every provision hereof shall be subject to
and construed according to the laws of the State of Maryland without regard to
conflict of law provisions thereof.
I-16
<PAGE>
SECTION 12.2 Reliance by Third Parties. Any certificate shall be final and
conclusive as to any Person dealing with the Trust if executed by an individual
who, according to the records of the Trust or of any recording office in which
this Third Amended and Restated Declaration of Trust may be recorded, appears to
be the Secretary or an Assistant Secretary of the Trust or a Trust Manager, and
if certifying to: (a) the number or identity of Trust Managers, officers of the
Trust or Shareholders; (b) the due authorization of the execution of any
document; (c) any action or vote taken, and the existence of a quorum at a
meeting of Trust Managers or Shareholders; (d) a copy of this Declaration or of
the Bylaws as a true and complete copy as then in force; (e) an amendment to
this Declaration; (f) the termination of the Trust; or (g) the existence of any
fact or facts which relate to the affairs of the Trust. No purchaser, lender,
transfer agent or other Person shall be bound to make any inquiry concerning the
validity of any transaction purported to be made on behalf of the Trust by the
Trust Managers or by any officer, employee or agent of the Trust.
SECTION 12.3 Provisions in Conflict With Law or Regulations.
(a) The provisions of this Third Amended and Restated Declaration of Trust
are severable, and if the Trust Managers shall determine, with the advice of
counsel, that any one or more of such provisions are in conflict with the REIT
Provisions of the Code, Title 8 or any other applicable federal or state law,
the conflicting provisions shall be deemed never to have constituted a part of
this Declaration of Trust, even without any amendment of this Declaration of
Trust pursuant to Article IX; PROVIDED, HOWEVER, that such determination by the
Trust Managers shall not affect or impair any of the remaining provisions of
this Declaration of Trust or render invalid or improper any action taken or
omitted prior to such determination. No Trust Manager shall be liable for making
or failing to make such a determination.
(b) If any provision of this Third Amended and Restated Declaration of Trust
shall be held invalid or unenforceable in any jurisdiction, such holding shall
not in any manner affect or render invalid or unenforceable such provision in
any other jurisdiction or any other provision of this Declaration of Trust in
any jurisdiction.
Section 12.4 Construction. In this Third Amended and Restated Declaration of
Trust, unless the context requires otherwise, words used in the singular or in
the plural include both the plural and singular and words denoting any gender
include all genders. Title and headings of different parts of this Declaration
are inserted for convenience and shall not affect the meaning, construction or
effect hereof. In defining or interpreting the powers and duties of the Trust
and its Trust Managers and officers, reference may be made, to the extent
appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3
of the Corporations and Associations Article of the Annotated Code of Maryland
(the "MARYLAND CODE"). In furtherance and not in limitation of the foregoing, in
accordance with the provisions of Title 3, Subtitles 6 and 7, of the Maryland
Code, the Trust shall be included within the definition of "corporation" for
purposes of such provisions.
SECTION 12.5 Recordation. This Third Amended and Restated Declaration of
Trust and any amendment or supplement hereto shall be filed for record with the
State Department of Assessments and Taxation of Maryland and may also be filed
or recorded in such other places as the Trust Managers deem appropriate, but
failure to file for record this Third Amended and Restated Declaration or any
amendment or supplement hereto in any office other than in the State of Maryland
shall not affect or impair the validity or effectiveness of this Third Amended
and Restated Declaration or any amendment hereto. This Third Amended and
Restated Declaration, and any subsequently amended and restated Declaration,
shall, upon filing, be conclusive evidence of all amendments or supplements
contained therein and may thereafter be referred to in lieu of the original
Declaration and the various amendments or supplements thereto.
I-17
<PAGE>
IN WITNESS WHEREOF, this Third Amended and Restated Declaration of Trust has
been signed on this day of , 1997, by the undersigned Trust Managers, each of
whom acknowledge that this document is his free act and deed, that, to the best
of his knowledge, information and belief, the matters and facts set forth herein
are true in all material respects and that this statement is made under the
penalties for perjury.
<TABLE>
<S> <C> <C>
/s/Harold Gorman /s/Damon Navarro /s/James F. Twaddell
- - --------------------- --------------------- ---------------------
Harold Gorman Damon D. Navarro James F. Twaddell
/s/J. Joseph Garrahy /s/Joseph R. LaBrosse
- - --------------------- ---------------------
J. Joseph Garrahy Joseph R. LaBrosse
</TABLE>
I-18
REVOLVING CREDIT AGREEMENT
among
GROVE OPERATING, L.P.,
GROVE PROPERTY TRUST
and
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK
and
OTHER BANKS WHICH MAY BECOME
PARTIES TO THIS AGREEMENT
and
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK,
AS AGENT
Dated March 26, 1997
<PAGE>
Table of Contents
ss.1. DEFINITIONS AND RULES OF INTERPRETATION..............................1
ss.1.1 Definitions................................................1
ss.1.2. Rules of Interpretation...................................1
ss.2. THE REVOLVING CREDIT FACILITY........................................1
ss.2.1. Commitment to Lend..........................................1
ss.2.2. [Intentionally Omitted]....................................2
ss.2.3. The Revolving Credit Notes..................................2
ss.2.4. Interest on Revolving Credit Loans; Fees....................2
ss.2.5. Requests for Revolving Credit Loans.........................3
ss.2.6. Conversion Options..........................................6
ss.2.7. Funds for Revolving Credit Loans............................8
ss.3. REPAYMENT OF THE REVOLVING CREDIT LOANS..............................9
ss.3.1. Maturity..................................................9
ss.3.2. Optional Repayments of Revolving Credit Loans.............9
ss.4. CERTAIN GENERAL PROVISIONS...........................................9
ss.4.1. Funds for Payments..........................................9
ss.4.2. Computations...............................................10
ss.4.3. Inability to Determine LIBOR Rate..........................11
ss.4.4. Illegality.................................................11
ss.4.5. Additional Costs, Etc......................................11
ss.4.6. Capital Adequacy...........................................13
ss.4.7. Certificate................................................13
ss.4.8. Indemnity..................................................13
ss.4.9. Interest on Overdue Amounts................................14
ss.5. COLLATERAL SECURITY.................................................14
ss.5.1. Collateral.................................................14
ss.5.2. Recourse Obligations.......................................15
ss.5.3. Release Conditions.........................................15
ss.5.4. Additions; Replacement.....................................15
ss.6. REPRESENTATIONS AND WARRANTIES......................................16
ss.7. AFFIRMATIVE COVENANTS...............................................18
ss.8. NEGATIVE COVENANTS..................................................21
ss.9. FINANCIAL COVENANTS.................................................24
ss.10. CONDITIONS TO THE CLOSING DATE.....................................25
ss.10.1. Loan Documents..........................................25
ss.10.2. Certified Copies of Organization Documents..............25
ss.10.3. By-Laws; Resolutions....................................25
ss.10.4. Incumbency Certificate; Authorized Signers..............25
ss.10.5. Validity of Liens.......................................26
ss.10.6. Survey and Taxes........................................26
ss.10.7. Title Insurance; Title Exception Documents..............26
ss.10.8. Leases, Service Contracts and Other Documents...........26
ss.10.9. Estoppel Agreements; Subordination, Attornment
and Non-Disturbance Agreements..........................26
ss.10.10. Certificates of Insurance..............................27
ss.10.11. Hazardous Substance Assessments............ ...........27
ss.10.12. Opinion of Counsel Concerning Organization and Loan
Documents..............................................27
ss.10.13. Appraisals................................ ............27
[ss.10.14. [Intentionally Omitted]...............................27
ss.10.15. Structural Condition Assurances........................27
ss.10.16. Permit Assurances; Compliance..........................27
ss.10.17. Guaranty...............................................28
ss.10.18. Financial Analysis of Initial Collateral Properties....28
ss.10.19. Inspection of Collateral Properties....................28
ss.10.20. Certifications from Government Officials; UCC-11 Reports.28
ss.10.21. Proceedings and Documents..............................28
ss.10.22. Fees...................................................28
ss.10.23. Closing Certificate....................................29
ss.10.24. Consolidation Transaction..............................29
ss.11. CONDITIONS TO ALL BORROWINGS.......................................29
ss.11.1. Representations True; No Event of Default; Compliance
Certificate...............................................29
ss.11.2. Date Down Endorsement.....................................29
ss.11.3. No Legal Impediment.......................................29
ss.11.4. Governmental Regulation...................................29
ss.12. EVENTS OF DEFAULT; ACCELERATION; ETC...............................30
ss.12.1. EVENTS OF DEFAULT; ACCELERATION...........................30
ss.12.2. Termination of Commitments................................31
ss.12.3. Remedies..................................................31
ss.12.4. Distribution of Collateral Proceeds.......................32
ss.13. SETOFF.............................................................33
ss.14. THE AGENT..........................................................33
ss.14.1. Authorization...........................................33
ss.14.2. Employees and Agents....................................34
ss.14.3. No Liability............................................34
ss.14.4. No Representations......................................34
ss.14.5. Payments................................................35
ss.14.6. Holders of Revolving Credit Notes.......................36
ss.14.7. Indemnity...............................................36
ss.14.8. Agent as Bank...........................................36
ss.14.9. Notification of Defaults and Events of Default..........36
ss.14.10. Duties in the Case of Enforcement......................37
ss.14.11. Successor Agent........................................37
ss.14.12. Notices................................................38
ss.15. ASSIGNMENT; PARTICIPATIONS; ETC....................................38
ss.15.1. Conditions to Assignment by Banks.........................38
ss.15.2. Certain Representations and Warranties; Limitations;
Covenants.................................................39
ss.15.3. Register..................................................39
ss.15.4. New Revolving Credit Notes................................40
ss.15.5. Participations............................................40
ss.15.6. Pledge by Lender..........................................41
ss.15.7. No Assignment by Borrower.................................41
ss.15.8. Disclosure................................................41
ss.16. CONSENTS, AMENDMENTS, WAIVERS, ETC.................................41
ss.17. [Intentionally Omitted]............................................43
ss.18. MISCELLANEOUS......................................................43
ss.19. PREJUDGMENT REMEDY WAIVER..........................................44
<PAGE>
EXHIBITS
A Form of Revolving Credit Note
B Form of Assignment of Leases and Rents
C Collateral Property Conditions
D Form of Business Plan Summary
E Form of Rent Roll
F Form of Loan Request
G Form of Compliance Certificate
H Form of Closing Certificate
I Form of Assignment and Assumption Agreement
<PAGE>
Schedules to Restated Revolving Credit Agreement
SCHEDULE 1 Banks' Commitments
SCHEDULE 2 Definitions and Rules of Interpretation
SCHEDULE 6(b) Capitalization; Outstanding Securities, Etc.
SCHEDULE 6(c) Partially Owned Real Estate Holding Entities
SCHEDULE 6(p) Subsidiaries/Joint Ventures
SCHEDULE 8(a)(ix) Existing Indebtedness of Borrower
SCHEDULE 8(b)(ix) First Union Collateral
SCHEDULE 8(b)(x) Citicorp Collateral
SCHEDULE 8(b)(xi) Existing Permitted Liens
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of the 26th day of March,
1997, by and among GROVE OPERATING, L.P., a Delaware limited partnership (the
"Borrower"), GROVE PROPERTY TRUST, a Maryland corporation which is the sole
general partner of the Borrower (the "Guarantor"), each having its principal
place of business at 598 Asylum Avenue, Hartford, Connecticut 06105, RHODE
ISLAND HOSPITAL TRUST NATIONAL BANK, a national banking association having its
principal place of business at One Hospital Trust Plaza, Providence, Rhode
Island 02903, and the other lending institutions which may become parties hereto
pursuant to ss.15 (individually, a "Bank" and collectively, the "Banks") and
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, as agent for itself and each other
Bank (in such capacity, the "Agent").
ss.1. DEFINITIONS AND RULES OF INTERPRETATION.
ss1.1. Definitions. Except as otherwise expressly provided herein, all
capitalized terms used in this Agreement, the exhibits hereto and any notes,
certificates, reports or other documents or instruments made or delivered
pursuant to or in connection with this Agreement shall have the meanings set
forth for such terms in Schedule 2 hereto.
ss1.2.Rules of Interpretation. Except as otherwise expressly provided
herein, the rules of interpretation set forth in Schedule 2 hereto shall apply
to this Agreement, the exhibits hereto and any notes, certificates, reports or
other documents or instruments made or delivered pursuant to or in connection
with this Agreement.
ss.2. THE REVOLVING CREDIT FACILITY.
ss2.1. Commintment to Lend. Subject to the provisions of ss.2.5 and the
other terms and conditions set forth in this Agreement, each of the Banks
severally agrees to lend to the Borrower and the Borrower may borrow, repay, and
reborrow from each Bank from time to time between the Closing Date and the
Maturity Date upon notice by the Borrower to the Agent given in accordance with
ss.2.5 hereof, such sums as are requested by the Borrower up to a maximum
aggregate principal amount outstanding (after giving effect to all amounts
requested) at any one time equal to such Bank's Commitment; provided that the
sum of the outstanding aggregate amount of the Revolving Credit Loans (after
giving effect to all amounts requested) shall not at any time exceed the
Borrowing Base at such time. The Borrower agrees that it shall be an Event of
Default if at any time the outstanding Revolving Credit Loans exceed the
Borrowing Base at such time and such excess is not paid to the Agent on behalf
of the Banks within thirty (30) days of the Agent's request therefor.
The Revolving Credit Loans shall be made pro rata in accordance with
each Bank's Commitment Percentage. Each request for a Revolving Credit Loan made
pursuant to ss.2.5 hereof shall constitute a representation and warranty by the
Borrower that the conditions set forth in ss.10 have been satisfied as of the
Closing Date and that the conditions set forth in ss.11 have been satisfied on
the date of such request and will be satisfied on the proposed Drawdown Date of
the requested Revolving Credit Loan. No Revolving Credit Loan shall be required
to be made by any Bank unless all of the conditions contained in ss.10 have been
satisfied as of the Closing Date and that the conditions set forth in ss.11 have
been met at the time of any request for a Revolving Credit Loan.
ss.2.2. [Intentionally Omitted]
ss2.3.The Reveolving Credit Notes. The Revolving Credit Loans shall be
evidenced by the Revolving Credit Notes. A Revolving Credit Note shall be
payable to the order of each Bank in an aggregate principal amount equal to such
Bank's Commitment. The Borrower irrevocably authorizes each Bank to make or
cause to be made, at or about the time of the Drawdown Date of any Revolving
Credit Loan or at the time of receipt of any payment of principal on such Bank's
Revolving Credit Notes, an appropriate notation on such Bank's Revolving Credit
Note Record reflecting the making of such Revolving Credit Loan or (as the case
may be) the receipt of such payment. The outstanding amount of the Revolving
Credit Loans set forth on such Bank's Revolving Credit Note Record shall be
prima facie evidence of the principal amount thereof owing and unpaid to such
Bank, but the failure to record, or any error in so recording, any such amount
on such Bank's Revolving Credit Note Record shall not limit or otherwise affect
the obligations of the Borrower hereunder or under any Revolving Credit Note to
make payments of principal of or interest on any Revolving Credit Note when due.
ss.2.4. Interest on Revolving Credit Loans; Fees.
(a)Each Base Rate Loan shall bear interest for the period commencing with
the Drawdown Date thereof and ending on the last day of each Interest Period
with respect thereto (unless earlier paid in accordance with ss.3.2) at a rate
equal to the Base Rate.
(b)Each LIBOR Rate Loan shall bear interest for the period commencing with
the Drawdown Date thereof and ending on the last day of each Interest Period
with respect thereto (unless earlier paid in accordance with ss.3.2) at a rate
equal to the LIBOR Rate determined for such Interest Period plus one and
two-tenths of one percent (1.20%).
(c) The Borrower unconditionally promises to pay interest on each Revolving
Credit Loan in arrears on each Interest Payment Date with respect thereto.
(d) The Borrower agrees to pay to the Agent for the respective accounts of
the Banks a facility fee (the "Facility Fee") equal to one half of one percent
(1/2%) of an amount (the "Initial Amount") equal to the sixty percent (60%) of
the Appraised Value of the Collateral Properties on the Closing Date. Such
facility fee shall be due and payable in two equal installments, with the first
installment due and payable on the Closing Date and the second installment due
and payable on that date which is the earliest to occur of (i) the payment in
full of the Obligations, (ii) any increase in the outstanding principal amount
of the Obligations above the Initial Amount and (iii) six (6) months following
the Closing Date. In addition, if the Agent shall determine at any time that an
amount equal to sixty percent (60%) of the Appraised Value of the Collateral
Properties after the Closing Date exceeds the Initial Amount, the Borrower shall
pay to the Agent for the respective accounts of the Banks within thirty (30)
days of the Agent's demand therefor an additional fee equal to one-half of one
percent (1/2%) of such excess; provided, that the Agent shall not be entitled to
request that the Borrower pay such additional fee with respect to any such
excess more than once during the term of this Agreement.
ss2.5. Requests for Revolving Credit Loans. The following provisions shall
apply to each request by the Borrower for a Revolving Credit Loan:
(a)The Borrower shall submit a Completed Loan Request to the Agent. The
Agent shall promptly deliver a duplicate copy of such Completed Loan
Request to each Bank which is then a party to this Agreement at the
time such loan request is made. Except as otherwise provided herein,
each Completed Loan Request shall be in a minimum amount of (i)
$250,000 or an integral multiple of $50,000 in excess thereof if such
Loan Request does not involve an Acquisition Property or a New
Collateral Property or (ii) $500,000 or an integral multiple of
$100,000 in excess thereof if such Loan Request involves an Acquisition
Property or New Collateral Property. Each Completed Loan Request shall
be irrevocable and binding on the Borrower and shall obligate the
Borrower to accept the Revolving Credit Loans requested from the Banks
on the proposed Drawdown Date, unless such Completed Loan Request is
withdrawn (x) in the case of a request for a LIBOR Rate Loan, at least
five (5) Business Days prior to the proposed Drawdown Date for such
Revolving Credit Loan, and (y) in the case of a request for a Base Rate
Loan, at least two (2) Business Days prior to the proposed Drawdown
Date for such Revolving Credit Loan.
(b) Each Completed Loan Request may be delivered by the Borrower
to the Agent by 10:00 a.m. on any Business Day, and
(i) in the case of a loan request that does not involve
an Acquisition Property or a New Collateral Property,
at least one (1) Business Day prior to the proposed
Drawdown Date of any Base Rate Loan, and at least
three (3) LIBOR Business Days prior to the proposed
Drawdown Date of any LIBOR Rate Loan; and
(ii) in the case of a loan request involving a proposed
Acquisition Property or Properties, at least fifteen
(15) Business Days prior to the proposed Drawdown
Date; and
(iii) in the case of a loan request involving a proposed
New Collateral Property, at least thirty (30) days
prior to the proposed Drawdown Date.
(c) Each Completed Loan Request shall include:
(A) in the case of a loan request that does not involve an
Acquisition Property or a New Collateral Property, a
completed writing in the form of Exhibit F hereto
specifying: (1) the principal amount of the Revolving
Credit Loan requested, (2) the proposed Drawdown Date
of such Revolving Credit Loan, (3) the Interest
Period applicable to such Revolving Credit Loan, (4)
the Type of such Revolving Credit Loan being
requested and (5) the purpose for which such funds
will be used (a "Completed Exhibit F"); and
(B) in the case of a loan request involving a proposed
Acquisition Property, (x) a Completed Exhibit F, and
(y) evidence that the proposed Acquisition Property
meets the following conditions (collectively, the
"Acquisition Conditions"):
(1) the proposed Acquisition Property
when aggregated with the other Real Estate
Assets would not violate the covenants
contained in ss.7(e); and
(2) the proposed Acquisition
Property (A) does not have unperformed or
unpaid remediation costs that are reasonably
likely to be incurred or other environmental
liabilities in excess of the greater of (I)
an amount equal to the sum of (y) $1,000
multiplied by the aggregate number of Units
in such Acquisition Property plus (z) $2.00
multiplied by each square foot of the gross
rentable area in such Acquisition Property
leased to commercial tenants and (II)
$500,000 and (B) would not cause such
aggregate unperformed or unpaid remediation
costs and/or other environmental liabilities
of all Real Estate Assets of the Borrower to
exceed the greater of (I) an amount equal to
the sum of (i) $1,000 multiplied by the
aggregate number of Units in such Real
Estate Assets plus (ii) $2.00 multiplied by
each square foot of the gross rentable area
in such Real Estate Assets leased to
commercial tenants and (II) $1,000,000. The
Completed Loan Request shall include
evidence that the Borrower has performed a
hazardous waste due diligence review of the
proposed Acquisition Property, and have
attached to it a copy of an environmental
site assessment report obtained by the
Borrower in connection with the proposed
acquisition which contains sufficient
information to permit the above
determination regarding potential
remediation costs or other environmental
liabilities to be made; and
(C) in the case of a loan request involving the addition of
a proposed New Collateral Property, (v) a Completed
Exhibit F, (w) evidence that the proposed New
Collateral Property meets the Acquisition Conditions,
(x) all of the documents and other information
relating to the proposed New Collateral Property
required by the Collateral Property Conditions, (y)
evidence that the proposed New Collateral Property
would not cause the aggregate unperformed or unpaid
remediation costs that are reasonably likely to be
incurred and/or other environmental liabilities of
all Collateral Properties to exceed the greater of
(I) an amount equal to the sum of (i) $1,000
multiplied by the aggregate number of Units in such
New Collateral Property plus (ii) $2.00 multiplied by
each square foot of the gross rentable area in such
New Collateral Property leased to commercial tenants
and (II) $500,000, and (z) evidence that the proposed
New Collateral Property when aggregated with the
other Collateral Properties would not violate the
covenants contained in ss.7(e).
(d) No Bank shall be obligated to fund any Revolving
Credit Loan unless:
(i) a Completed Loan Request has been timely
received by the Agent as provided in
subsection (a) above; and
(ii) both before and after giving effect to the Revolving
Credit Loan to be made pursuant to the Completed Loan
Request, all of the conditions contained in ss.10
shall have been satisfied as of the Closing Date and
all of the conditions set forth in ss.11 shall have
been met, including, without limitation, the
condition under ss.11.1 that there be no Default or
Event of Default under this Agreement; and
(iii) the Agent shall have received a certificate in the form
of Exhibit G hereto signed by the chief financial officer of
the Borrower (in his capacity as such and not in his
individual capacity) (copies of which shall be delivered by
the Agent promptly to the Banks) setting forth computations
evidencing compliance with the covenants contained in ss.9 on
a pro forma basis after giving effect to such requested
Revolving Credit Loan, and certifying that to the best
knowledge of such officer after due inquiry, both before and
after giving effect to such requested Revolving Credit Loan,
no Default or Event of Default exists or will exist under this
Agreement or any other Loan Document; and
(iv) in the case of a loan request not involving an
Acquisition Property or a New Collateral Property,
the proceeds of the Revolving Credit Loan are to be
used for the purposes and meet the conditions set
forth therein; and
(v) in the case of a loan request involving a
proposed Acquisition Property, the
Acquisition Conditions have been met; and
(vi) in the case of a loan request involving the
acquisition of an Acquisition Property and its
proposed inclusion as a New Collateral Property, the
Collateral Property Conditions and the Acquisition
Conditions have been met.
ss.2.6. Conversion Options.
(a) The Borrower may elect from time to time to convert any
outstanding Revolving Credit Loan to a Revolving Credit Loan of another
Type, provided that (i) with respect to any such conversion of a LIBOR
Rate Loan to a Base Rate Loan, such conversion shall take place
automatically at the end of the applicable Interest Period unless the
Borrower provides notice to the Agent of its request to continue such
Revolving Credit Loan as a LIBOR Rate Loan as provided in ss.2.6(b) and
ss.2.6(a)(ii); (ii) subject to the further proviso at the end of this
ss.2.6(a) and subject to ss.2.6(b) and 2.6(d), with respect to any
conversion of a Base Rate Loan to a LIBOR Rate Loan (or a continuation
of a LIBOR Rate Loan, as provided in ss.2.6(b)), the Borrower shall
give the Agent at least three (3) LIBOR Business Days' prior written
notice of such election, which such notice must be received by the
Agent by 10:00 a.m. on any Business Day; and (iii) no Revolving Credit
Loan may be converted into a LIBOR Rate Loan when any Default or Event
of Default has occurred and is continuing. The Agent shall provide each
Bank with a copy of such notice promptly after its receipt thereof. All
or any part of outstanding Revolving Credit Loans of any Type may be
converted as provided herein, provided that each Conversion Request
relating to the conversion of a Base Rate Loan to a LIBOR Rate Loan
shall be for an amount equal to $250,000 or an integral multiple of
$50,000 in excess thereof and shall be irrevocable by the Borrower.
(b) Any Revolving Credit Loan of any Type may be continued as such upon
the expiration of the Interest Period with respect thereto (i) in the
case of Base Rate Loans, automatically and (ii) in the case of LIBOR
Rate Loans by compliance by the Borrower with the notice provisions
contained in ss.2.6(a)(ii); provided that no LIBOR Rate Loan may be
continued as such when any Event of Default has occurred and is
continuing but shall be automatically converted to a Base Rate Loan on
the last day of the first Interest Period relating thereto ending
during the continuance of any Event of Default. The Agent shall notify
the Banks promptly when any such automatic conversion contemplated by
this ss.2.6(b) is scheduled to occur.
(c) In the event that the Borrower does not notify the Agent of its
election hereunder with respect to any Revolving Credit Loan, such
Revolving Credit Loan shall be automatically converted to a Base Rate
Loan at the end of the applicable Interest Period.
(d) The Borrower may not request or elect a LIBOR Rate Loan pursuant to
ss.2.5, elect to convert a Base Rate Loan to a LIBOR Loan pursuant to
ss.2.6(a) or elect to continue a LIBOR Rate Loan pursuant to ss.2.6(b)
if, after giving effect thereto, there would be greater than five (5)
LIBOR Rate Loans then outstanding. Any Revolving Credit Loan Request
for a LIBOR Rate Loan that would create greater than five (5) LIBOR
Rate Loans outstanding shall be deemed to be a Loan Request for a Base
Rate Loan.
ss.2.7. Funds for Revolving Credit Loans.
(a) Subject to the other provisions of this ss.2, not later than 11:00
a.m. (Providence time) on the proposed Drawdown Date of any Revolving
Credit Loans, each of the Banks will make available to the Agent, at
its Head Office, in immediately available funds, the amount of such
Bank's Commitment Percentage of the amount of the requested Revolving
Credit Loan. Upon receipt from each Bank of such amount, the Agent
will make available to the Borrower the aggregate amount of such
Revolving Credit Loan made available to the Agent by the Banks; all
such funds received by the Agent by 11:00 a.m. (Providence Time) on
any Business Day will be made available to the Borrower not later than
2:00 p.m. on the same Business Day. Funds received after such time
will be made available by not later than 11:00 a.m. on the next
Business Day. The failure or refusal of any Bank to make available to
the Agent at the aforesaid time and place on any Drawdown Date the
amount of its Commitment Percentage of the requested Revolving Credit
Loan shall not relieve any other Bank from its several obligation
hereunder to make available to the Agent the amount of its Commitment
Percentage of any requested Revolving Credit Loan but in no event
shall the Agent (in its capacity as Agent) have any obligation to make
any funding or shall any Bank be obligated to fund more than its
Commitment Percentage of the requested Revolving Credit Loan or to
increase its Commitment Percentage on account of such failure or
otherwise.
(b) The Agent may, unless notified to the contrary by any Bank prior to a
Drawdown Date, assume that such Bank has made available to the Agent
on such Drawdown Date the amount of such Bank's Commitment Percentage
of the Revolving Credit Loan to be made on such Drawdown Date, and the
Agent may (but it shall not be required to), in reliance upon such
assumption, make available to the Borrower a corresponding amount. If
any Bank makes available to the Agent such amount on a date after such
Drawdown Date, such Bank shall pay to the Agent on demand an amount
equal to the product of (i) the average, computed for the period
referred to in clause (iii) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during
each day included in such period, multiplied by (ii) the amount of
such Bank's Commitment Percentage of such Revolving Credit Loan,
multiplied by (iii) a fraction, the numerator of which is the number
of days that elapsed from and including such Drawdown Date to the date
on which the amount of such Bank's Commitment Percentage of such
Revolving Credit Loan shall become immediately available to the Agent,
and the denominator of which is 365. A statement of the Agent
submitted to such Bank with respect to any amounts owing under this
paragraph shall be prima facie evidence of the amount due and owing to
the Agent by such Bank.
ss.3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
ss3.1. Maturity. The Borrower promises to pay on the Maturity Date, and
there shall become absolutely due and payable on the Maturity Date,
all unpaid principal of the Revolving Credit Loans outstanding on such
date, together with any and all accrued and unpaid interest thereon,
the unpaid balance of any fees accrued through such date, and any and
all other unpaid amounts due under this Agreement, the Revolving
Credit Notes or any other of the Loan Documents.
ss3.2. Optional Repayments of Revolving Credit Line.The Borrower shall have
the right, at its election, to prepay the outstanding amount of the
Revolving Credit Loans, in whole or in part, at any time without
penalty or premium; provided that the outstanding amount of any LIBOR
Rate Loans may not be prepaid unless the Borrower pays all amounts due
and payable under ss.4.8 hereof for each LIBOR Rate Loan so prepaid at
the time of such prepayment. The Borrower shall give the Agent, no
later than 10:00 a.m., Boston time, at least five (5) Business Days
prior written notice of any prepayment pursuant to this ss.3.2 of any
Revolving Credit Loans, specifying the proposed date of prepayment of
Revolving Credit Loans and the principal amount to be prepaid. The
Agent shall provide each Bank with a copy of such notice promptly
after its receipt thereof. Each such partial prepayment of the
Revolving Credit Loans shall be in an integral multiple of $100,000,
or, if less, the outstanding balance of the Revolving Credit Loans
then being repaid, shall be accompanied by the payment of all charges
outstanding on all Revolving Credit Loans so prepaid and of all
accrued interest on the principal prepaid to the date of payment, and
shall be applied, in the absence of instruction by the Borrower, first
to the principal of Base Rate Loans and then to the principal of LIBOR
Rate Loans, at the Agent's option.
ss.4. CERTAIN GENERAL PROVISIONS.
ss.4.1. Funds for Payments.
(a) All payments of principal, interest, fees, and any other amounts due
hereunder or under any of the other Loan Documents shall be made to
the Agent, for the respective accounts of the Banks or (as the case
may be) the Agent, at the Agent's Head Office, in each case in Dollars
and in immediately available funds.
(b) All payments by the Borrower hereunder and under any of the
other Loan Documents shall be made without setoff or counterclaim and
free and clear of and without deduction for any taxes, levies, imposts,
duties, charges, fees, deductions, withholdings, compulsory liens,
restrictions or conditions of any nature now or hereafter imposed or
levied by any jurisdiction or any political subdivision thereof or
taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding. If any such obligation is
imposed upon the Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents, the Borrower shall
pay to the Agent, for the account of the Banks or (as the case may be)
the Agent, on the date on which such amount is due and payable
hereunder or under such other Loan Document, such additional amount in
Dollars as shall be necessary to enable the Banks to receive the same
net amount which the Banks would have received on such due date had no
such obligation been imposed upon the Borrower. The Borrower will
deliver promptly to the Agent certificates or other valid vouchers for
all taxes or other charges deducted from or paid with respect to
payments made by the Borrower hereunder or under such other Loan
Document. The Agent shall provide each Bank with a copy of such notice
promptly after its receipt thereof.
(c)The Agent and the Banks acknowledge that the Borrower will establish a
demand deposit account with the Agent and intends to deposit into such
account on a monthly basis an amount not less than the amount of
interest due and payable during such month. Without limiting anything
set forth herein, the Agent shall be entitled to charge such account of
the Borrower with the Bank for any sum due and payable by the Borrower
hereunder or under any of the other Loan Documents. Notwithstanding
anything to the contrary contained herein or in any other Loan
Document, if, on any date that a payment is due to the Agent or the
Banks under the Loan Documents, there are sufficient funds in such
account to make such payment and there is no legal impediment of any
kind to Agent's effecting such payment by debiting such account, then
Borrower shall have no obligation to make such payment (other than by
way of Agent's debiting such account in accordance with the above
provisions of this paragraph (c)) and no late charge or default rate
interest shall accrue, and no Event of Default shall result, from
Borrower's failure to make such payment while such sufficient funds
remain in such account to make such payment.
ss4.2. Computations. All computations of interest on the Revolving Credit
Loans and of commitment or other similar fees (if any) to the extent applicable
shall be based on a 360-day year and paid for the actual number of days elapsed.
Except as otherwise provided in the definition of the term "Interest Period"
with respect to LIBOR Rate Loans, whenever a payment hereunder or under any of
the other Loan Documents becomes due on a day that is not a Business Day, the
due date for such payment shall be extended to the next succeeding Business Day,
and interest shall accrue during such extension. The outstanding amount of the
Revolving Credit Loans as reflected on the Revolving Credit Note Record from
time to time shall constitute prima facie evidence of the principal amount
thereof.
ss4.3. Inability to Determine LIBOR Rate. In the event, prior to the
commencement of any Interest Period relating to any LIBOR Rate Loan, the Agent
shall reasonably determine that adequate and reasonable methods do not exist for
ascertaining the LIBOR Rate that would otherwise determine the rate of interest
to be applicable to any LIBOR Rate Loan during any Interest Period (and the rate
of interest applicable to all indebtedness due and owing to the Agent by any
Person to the extent that the principal amount of such indebtedness was intended
to bear interest at the LIBOR Rate), the Agent shall forthwith give notice of
such determination (which shall be conclusive and binding on the Borrower) to
the Borrower and the Banks. In such event (a) any Completed Loan Request with
respect to LIBOR Rate Loans shall be automatically withdrawn and shall be deemed
a request for Base Rate Loans, (b) each LIBOR Rate Loan will automatically, on
the last day of the then current Interest Period thereof, become a Base Rate
Loan, and (c) the obligations of the Banks to make LIBOR Rate Loans shall be
suspended until the Agent reasonably determines that the circumstances giving
rise to such suspension no longer exist, whereupon the Agent shall so notify the
Borrower and the Banks.
ss4.4.Illegality. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
LIBOR Rate Loans, such Bank shall forthwith give notice of such circumstances to
the Borrower and thereupon (a) the Commitment of such Bank to make LIBOR Rate
Loans or convert Base Rate Loans to LIBOR Rate Loans shall forthwith be
suspended and (b) such Bank's Commitment Percentage of a LIBOR Rate Loans then
outstanding shall be converted automatically to Base Rate Loans on the last day
of each Interest Period applicable to such LIBOR Rate Loans or within such
earlier period as may be required by law, all until such time as it is no longer
unlawful for such Bank to make or maintain LIBOR Rate Loans. The Borrower hereby
agrees promptly to pay the Agent for the account of such Bank, upon demand, any
additional amounts necessary to compensate such Bank for any out-of-pocket costs
incurred by such Bank in making any conversion required by this ss.4.4 prior to
the last day of an Interest Period with respect to a LIBOR Rate Loan, including
any interest or fees payable by such Bank to lenders of funds obtained by it in
order to make or maintain its LIBOR Rate Loans hereunder.
ss4.5. Additional Costs, Etc. If any present or future applicable law,
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank by any central bank or other fiscal, monetary or
other authority (whether or not having the force of law, but if not having the
force of law, then generally applied by the Banks with respect to similar
loans), shall:
(a) subject any Bank to any tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature with respect to this Agreement,
the other Loan Documents, such Bank's Commitment or the Revolving
Credit Loans (other than taxes based upon or measured by the income or
profits of such Bank), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of
or the interest on any Revolving Credit Loans or any other amounts
payable to the Agent or any Bank under this Agreement or the other Loan
Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any
special deposit, reserve, assessment, liquidity, capital adequacy or
other similar requirements (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans
by, or commitments of an office of any Bank, or
(d) impose on any Bank any other conditions or requirements with
respect to this Agreement, the other Loan Documents, the Revolving
Credit Loans, such Bank's Commitment, or any class of loans or
commitments of which any of the Revolving Credit Loans or such Bank's
Commitment forms a part;
and the result of any of the foregoing is
(i) to increase the cost to such Bank of making,
funding, issuing, renewing, extending or maintaining
any of the Revolving Credit Loans or such Bank's
Commitment, or
(ii) to reduce the amount of principal, interest or other
amount payable to such Bank hereunder on account of such
Bank's Commitment or any of the Revolving Credit Loans, or
(iii) to require such Bank to make any payment or to forego
any interest or other sum payable hereunder, the amount of
which payment or foregone interest or other sum is calculated
by reference to the gross amount of any sum receivable or
deemed received by such Bank from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by
such Bank at any time and from time to time and as often as the occasion
therefor may arise, pay to such Bank such additional amounts as such Bank shall
determine in good faith to be sufficient to compensate such Bank for such
additional cost, reduction, payment or foregone interest or other sum, provided
that such Bank is generally imposing similar charges on its other similarly
situated borrowers.
ss4.6. Capital Adequacy. If any future law, governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law, but if
not having the force of law, then generally applied by the Banks with respect to
similar loans) or the interpretation thereof by a court or governmental
authority with appropriate jurisdiction affects the amount of capital required
or expected to be maintained by banks or bank holding companies and any Bank or
the Agent determines that the amount of capital required to be maintained by it
is increased by or based upon the existence of Revolving Credit Loans made or
deemed to be made pursuant hereto, then such Bank or the Agent may notify the
Borrower of such fact, and the Borrower shall pay to such Bank or the Agent from
time to time on demand, as an additional fee payable hereunder, such amount as
such Bank or the Agent shall determine in good faith and certify in a notice to
the Borrower to be an amount that will adequately compensate such Bank in light
of these circumstances for its increased costs of maintaining such capital. Each
Bank and the Agent shall allocate such cost increases among its customers in
good faith and on an equitable basis, and will not charge the Borrower unless it
is generally imposing a similar charge on its other similarly situated
borrowers.
ss4.7. Certificate. A certificate setting forth any additional amounts
payable pursuant to ss.ss.4.5 or 4.6 and a brief explanation of such amounts
which are due, submitted by any Bank or the Agent to the Borrower, shall be
prima facie evidence that such amounts are due and owing.
ss4.8. Indemnity. In addition to the other provisions of this Agreement
regarding such matters, the Borrower agrees to indemnify the Agent and each Bank
and to hold the Agent and each Bank harmless from and against any loss, cost or
expense (but excluding any loss of anticipated profits) that the Agent or such
Bank may sustain or incur as a consequence of (a) the failure by the Borrower to
pay any principal amount of or any interest on any LIBOR Rate Loans as and when
due and payable, including any such loss or expense arising from interest or
fees payable by the Agent or such Bank to lenders of funds obtained by it in
order to maintain its LIBOR Rate Loans, (b) the failure by the Borrower to make
a borrowing or conversion after the Borrower has given a Completed Loan Request
for a LIBOR Rate Loan or a Conversion Request for a LIBOR Rate Loan, and (c) the
making of any payment of a LIBOR Rate Loan or the making of any conversion of
any such Revolving Credit Loan to a Base Rate Loan on a day that is not the last
day of the applicable Interest Period with respect thereto, including interest
or fees payable by the Agent or a Bank to lenders of funds obtained by it in
order to maintain any such LIBOR Rate Loans.
ss4.9. Interest on Overdue Amounts. Overdue principal and (to the extent
permitted by applicable law) interest on the Revolving Credit Loans and all
other overdue amounts payable hereunder or under any of the other Loan Documents
shall bear interest payable on demand at a rate per annum equal to four percent
(4%) above the Base Rate until such amount shall be paid in full (after as well
as before judgment). In addition, the Borrower shall pay a late charge equal to
three percent (3%) of any amount of principal (other than principal due on the
Maturity Date) and/or interest charges on the Revolving Credit Loans which is
not paid within ten (10) days of the date when due.
ss.5. COLLATERAL SECURITY.
ss5.1. Collateral. The Obligations shall be secured by (i) a perfected
first priority lien and security interest to be held by the Agent for the
benefit of the Banks (subject only to Permitted Liens) in each of the Collateral
Properties, pursuant to the terms of the Security Deed applicable to each
Collateral Property, (ii) a perfected first priority assignment and security
interest to be held by the Agent for the benefit of the Banks in the Leases
pursuant to the Assignments of Rents and Leases, (iii) a perfected first
priority assignment and security interest, to the extent assignable under
applicable law, to be held by the Agent for the benefit of the Banks, in the
Permits and Service Agreements pursuant to the Security Deeds, (iv) a perfected
first priority lien and security interest to be held by the Agent (subject only
to the Permitted Liens) in all furniture, fixtures, equipment, building
materials, general intangibles and other personal property owned by the Borrower
relating to the Collateral Properties, (v) the Guaranty, (vi) the Environmental
Indemnity Agreement, (vii) the Additional Guaranties and (viii) any and all
other property of the Borrower, real or personal, tangible or intangible, in
which the Agent or any Bank now has or hereafter acquires a security interest or
which is now or may hereafter be in the possession of the Agent or any Bank to
secure the Obligations, and all proceeds and products of and accessions to all
of the foregoing.
ss5.2.Recourse Obligations. Notwithstanding the foregoing Collateral,
the Obligations are full recourse obligations of the Borrower, the Guarantor and
the Additional Guarantors and all of their respective assets and properties
shall be available for the payment in full in cash and performance of the
Obligations.
ss5.3 Release Conditions. From time to time during the term of the
Revolving Credit Loans, the Borrower may request the Agent (on behalf of the
Banks) to release the security interest in and lien on any Collateral Property,
and the Agent shall provide such release, if the Borrower has met the following
conditions as to each such requested release (the "Collateral Release
Conditions"): the Agent shall have determined that the Appraised Value of the
Collateral Properties remaining after the proposed release will be sufficient so
that, immediately following such release, the outstanding amount of Revolving
Credit Loans will not exceed the Borrowing Base (after taking into account such
release), and the Borrower shall have provided to the Agent a compliance
certificate of the chief financial officer of the Borrower evidencing that,
after giving effect to such release, the Borrower will be in compliance with the
covenants contained in ss.9 hereof on a pro forma basis after giving effect to
the release, attaching a copy of the pro forma analysis used in determining such
compliance, and certifying that, to the best knowledge of such chief financial
officer after due inquiry both before and after giving effect to such release,
no Default or Event of Default exists or will exist under any Loan Document.
ss5.4. Additions; Replacement. From time to time during the term of the
Revolving Credit Loans, the Borrower may request in writing the Banks to replace
or add to the Collateral then held by the Agent for the benefit of the Banks.
Any such request for replacement or addition may be approved only by Unanimous
Bank Approval, which approval may be given or withheld by each Bank in its sole
discretion, as hereinafter provided. The Banks shall approve or deny such
request in writing within thirty (30) days of receipt, provided that the Agent
has received, at the time such request is made, all of the information regarding
the Real Estate Asset proposed to be added to the Collateral required by the
Collateral Property Conditions. Any property so approved by the Agent and the
Banks as a replacement of or addition to the Collateral (a "New Collateral
Property") shall secure the Revolving Credit Loans and the Appraised Value of
such New Collateral Property shall thereafter be included in computing the
Borrowing Base. The Borrower shall reimburse the Agent for its reasonable costs
and expenses (including reasonable attorneys' fees and expenses of the Agent's
counsel) in evaluating the proposed New Collateral Property and, if approved,
causing it to secure the Obligations. Without in any way limiting the absolute
discretion of the Banks to approve or deny any request to include a property as
a New Collateral Property, before a property shall become a New Collateral
Property, the Borrower shall have, in any case, satisfied each of the following
conditions (the "Additional Collateral Property Conditions"):
(a) The Acquisition Conditions have been met with respect to the
Property (whether or not the proposed New Collateral Property is then
owned by the Borrower or an Additional Guarantor or is a proposed
Acquisition Property) and the Borrower or an Additional Guarantor (as
applicable) shall have executed and delivered to the Agent, with
respect to the proposed New Collateral Property, agreements or other
documentation substantially similar to the Security Documents (adjusted
to reflect differences in the laws of the state in which the New
Collateral is located) to create, evidence and secure a perfected first
priority lien in favor of the Agent, for the benefit of the Banks, in
the New Collateral Property (including, without limitation, (i) the
Leases, (ii) the Permits and Service Agreements (to the extent
assignable under applicable law), and (iii) the Building and Building
Service Equipment relating thereto);
(b) The Borrower or an Additional Guarantor (as applicable) shall
satisfy, with respect to the proposed New Collateral Property, to the
satisfaction of the Banks by Unanimous Bank Approval (in their sole
discretion), each of the Collateral Property Conditions with respect to
each New Collateral Property;
(c) No Default or Event of Default shall exist under this Agreement
or any other Loan Document at the time of any acceptance of a New
Collateral Property, unless such Default or Event of Default would be
cured thereby and the Borrower shall have delivered a compliance
certificate in the form of Exhibit G to the Agent (with copies for each
Bank) to such effect;
(d) The New Collateral Property shall be 100% owned in fee simple by
the Borrower or an Additional Guarantor (as applicable) and shall be
unencumbered (other than in favor of the Agent and the Banks or as
otherwise approved by Unanimous Bank Approval); and
(e) The Banks by Unanimous Bank Approval shall, in their sole
discretion, have approved in writing the addition of the property as a
New Collateral Property for inclusion in the Borrowing Base.
ss6. REPRESENTATIONSS AND WARRANTIES.The Borrower and the Guarantor
represent and warrant to the Agent and the Banks on the date hereof, on the date
of any Revolving Loan Request, and on each Drawdown Date of any Revolving Credit
Loan that: (a) each of the Borrower, the Guarantor and each Additional Guarantor
is duly organized, validly existing, and in good standing under the laws of its
jurisdiction of organization and is duly qualified and in good standing in every
other jurisdiction where it is required to be so qualified, and the execution,
delivery and performance by each of the Borrower, the Guarantor and each
Additional Guarantor of the Loan Documents (i) are within its trust, partnership
or corporate authority, (ii) have been duly authorized, (iii) do not conflict
with or contravene its Charter Documents; (b) the outstanding equity of the
Borrower on the date hereof is comprised of a general partner interest and
limited partner interests, all of which have been duly issued and are
outstanding and fully paid and, with respect to limited partner interests,
nonassessable, all as set forth in Schedule 6(b) hereto; (c) each of the direct
or indirect interests of the Borrower in any Partially-Owned Real Estate Holding
Entity is set forth on Schedule 6(c) hereto (as updated from time to time in
accordance with the terms hereof), including the type of entity in which the
interest is held, the percentage interest owned by the Borrower in such entity,
the capacity in which the Borrower holds the interest, and the Borrower's
ownership interest therein; provided, that the Borrower agrees to update (at the
end of each calendar quarter) such Schedule 6(c) in connection with any
additional Investment in any Partially-Owned Real Estate Holding Entity after
the date hereof that is permitted by the terms hereof; (d) upon execution and
delivery thereof, each Loan Document shall constitute the legal, valid and
binding obligation of the Borrower, the Guarantor or the Additional Guarantors,
as the case may be, enforceable in accordance with its terms; (e) each of the
Borrower, the Guarantor and each Additional Guarantor has good and marketable
title to all its material properties, subject only to Permitted Liens and
possesses or has the legal right to use all assets, including intellectual
properties, franchises and Consents adequate for the conduct of its business as
now conducted, without known conflict with any rights of others; (f) the
Borrower has provided to the Agent and the Banks its unaudited pro forma
Financials as of September 30, 1996 and for the period then ended, and such pro
forma Financials are complete and correct in all material respects and have been
prepared in accordance with GAAP consistently applied; (g) since September 30,
1996, there has been no materially adverse change of any kind in the Borrower
which would have a Materially Adverse Effect; (h) the Guarantor has provided to
the Agent and the Banks (i) the pro forma condensed consolidated balance sheet
of the Guarantor and its Subsidiaries (including, without limitation, the
Borrower) as of September 30, 1996 and their related consolidated statements of
operations for the fiscal year ended September 30, 1996 and (ii) the SEC Filings
which contain a summary of information relating to the Real Estate Assets and
such information is true and correct in all material respects; (i) since
September 30, 1996, there has been no materially adverse change of any kind in
the Guarantor which would have a Materially Adverse Effect; (j) each Additional
Guarantor has delivered to the Agent and the Banks its unaudited operating
statements as at September 30, 1996 and for the period then ended and such
operating statements are complete and correct in all material respects; (k)
since September 30, 1996, there has been no materially adverse change of any
kind in any Additional Guarantor which would have a Materially Adverse Effect;
(l) there are no legal or other proceedings or investigations pending or, to the
best knowledge of the Borrower, the Guarantor or any Additional Guarantor,
threatened against the Borrower, the Guarantor or such Additional Guarantor
before any court, tribunal or regulatory authority which would, if adversely
determined, alone or together, have a Materially Adverse Effect; (m) the
execution, delivery, performance of its obligations, and exercise of its rights
under the Loan Documents by the Borrower, the Guarantor and each Additional
Guarantor, including borrowing under this Agreement (i) to the best knowledge of
the Borrower and the Guarantor after due inquiry, do not require any Consents;
and (ii) are not and will not be in conflict with or prohibited or prevented by
(A) any Requirement of Law, (B) any Charter Document, trust minute or
resolution, or (C) in any material respect, instrument, agreement or provision
thereof, in each case binding on the Borrower, the Guarantor or any Additional
Guarantor or affecting any property of the Borrower, the Guarantor or any
Additional Guarantor; (n) neither the Guarantor, the Borrower nor any Additional
Guarantor is in violation of (A) any Charter Document, trust minute or
resolution, (B) any instrument or agreement, in each case binding on it or
affecting its property, or (C) any Requirement of Law, in a manner which could
have a Materially Adverse Effect, including, without limitation, all applicable
federal and state tax laws, ERISA and Environmental Laws; (o) to the best
knowledge of the Borrower and the Guarantor after due inquiry, upon execution
and delivery of the Security Documents and the filing of documents thereby
required, the Agent shall have a first-priority perfected security interest in
the Collateral, subject only to Permitted Liens entitled to priority under
applicable law, with no financing statements, chattel mortgages, real estate
mortgages or similar filings on record anywhere which conflict with such
first-priority interest; (p) except as set forth on Schedule 6(p) attached
hereto and other Investments expressly permitted by the terms hereof, neither
the Guarantor nor the Borrower has any Subsidiaries and is not a party to any
partnership or joint venture; (q) the Guarantor qualifies as a REIT pursuant to
ss.856-860 of the Code and the related regulations; and (r) the Borrower has
provided the Agent on behalf of the Banks with Lease Summaries and information
packages regarding each of the Collateral Properties, and such information
packages fairly represent the position of each of the Collateral Properties on
the date hereof or as of the date of delivery thereof (if applicable).
ss7. AFFIRMATIVE COVENANTS. The Borrower and the Guarantor jointly and
severally agree that until the termination of the Commitment and the payment and
satisfaction in full of all the Obligations, the Borrower and the Guarantor will
comply with their respective obligations as set forth throughout this Agreement
and will, and will cause each of their respective Subsidiaries to:
(a) furnish the Agent on behalf of the Banks: (i) as soon as
available but in any event within ninety (90) days after the close of
each fiscal year, the Guarantor's audited Financials for such fiscal
year, certified by the Guarantor's accountants; (ii) within ninety (90)
days after the close of each fiscal year (or contemporaneously with the
filing thereof with the SEC), the Form 10-K (or with respect to the
1997 fiscal year of the Guarantor, the Form 10-KSB) filed by the
Guarantor with the SEC with respect to such fiscal year; (iii) as soon
as available but in any event within forty-five (45) days after the end
of each fiscal quarter of the Guarantor the Form 10-Q statement (or
with respect to the 1997 fiscal year of the Guarantor, the Form 10-QSB
statement) filed by the Guarantor with the SEC with respect to such
fiscal quarter, (iv) as soon as available but in any event within
ninety (90) days after the close of each fiscal year of the Borrower,
the Borrower's audited Financials for such fiscal year, certified by
the Borrower's accountants, (v) within forty-five (45) days after the
close of each fiscal quarter of the Borrower, the Borrower's unaudited
Financials for such fiscal quarter, together with unaudited Lease
Summaries, rent rolls, rent receivables and operating statements
regarding each of the Collateral Properties, each in form and substance
reasonably satisfactory to the Banks, with respect to all of the
Borrower's Real Estate Assets for such fiscal quarter; (vi) together
with the quarterly and annual audited Financials, a certificate of the
Borrower and the Guarantor (in substantially the form attached to
Exhibit G hereto) setting forth computations demonstrating compliance
with the Borrower's and the Guarantor's financial covenants set forth
in ss.9 hereof, and certifying that no Default or Event of Default has
occurred, or if it has, the actions taken by the Borrower or the
Guarantor with respect thereto; (vii) contemporaneously with the filing
or mailing thereof, copies of all material of a financial nature filed
with the SEC or sent to the owners/stockholders or partners of the
Guarantor or the Borrower; (viii) promptly after its receipt thereof,
annual financial information regarding commercial tenants in the
Collateral Properties as applicable and available and (ix) if a Default
or an Event of Default or a materially adverse change in any of the
Collateral Properties shall have occurred, Appraisals (or updates
thereof if required) of the Collateral Properties within thirty (30)
days after the request of the Agent therefor;
(b) keep true and accurate books of account in accordance with GAAP
and to permit the Agent or any Bank or its designated representatives
during normal business hours and upon reasonable prior notice (unless,
in each case, a Default or Event of Default has occurred whereupon no
such notice shall be required) to inspect the Borrower's or the
Guarantor's premises and to examine and be advised as to such or other
business records upon the request of the Agent or such Bank;
(c) maintain in good operating condition its business and assets,
to keep its business and assets adequately insured, to maintain its
chief executive office in the United States, to continue to engage in
the same lines of business, and to comply with all Requirements of Law,
including ERISA and Environmental Laws;
(d) notify the Agent on behalf of the Banks promptly in writing of
(i) the occurrence of any Default or Event of Default, (ii) any
noncompliance with ERISA or any Environmental Law or proceeding in
respect thereof which could have a Materially Adverse Effect, (iii) any
change of name or address, (iv) any threatened or pending litigation or
similar proceeding affecting the Borrower, the Guarantor or any
Additional Guarantor or any of the Collateral Properties which could
have a Materially Adverse Effect or any material change in any such
litigation or proceeding previously reported and (v) claims against any
assets or properties of the Borrower or the Guarantor encumbered in
favor of the Agent which could have a Materially Adverse Effect;
(e) use the proceeds of the Revolving Credit Loans solely to finance
acquisitions by the Borrower or Subsidiaries of the Borrower of Real
Estate Assets and to pay reasonable and customary costs associated with
such acquisitions in accordance with the terms hereof and the Business
Plan Summary and for the repair and improvement of such acquired Real
Estate Assets, and not for the carrying of "margin security" or "margin
stock" within the meaning of Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224;
provided, that, notwithstanding the foregoing, the Borrower may use a
portion of the aggregate outstanding principal amount of the Revolving
Credit Loans not in excess of (i) $4,000,000 for general working
capital purposes of the Borrower and (ii) $2,000,000 to consummate
stock repurchase arrangements of the Guarantor;
(f) cooperate with the Agent and the Banks, take such action,
execute such documents, and provide such information as the Agent and
the Banks may from time to time reasonably request in order further to
effect the transactions contemplated by and the purposes of the Loan
Documents, including without limitation the delivery at the expense of
the Borrower, the Guarantor and the Additional Guarantors of Appraisals
(with respect to the New Collateral Properties), additional title
insurance, surveys, or environmental assessments;
(g) do or cause to be done all things necessary to preserve and keep
in full force and effect the existence of the Guarantor as a Maryland
real estate investment trust and its election to be taxed as a REIT
under the provisions of Sections 856-860 of the Code, or such other
laws as may be applicable in order to maintain the current material
characteristics of the Guarantor as an investment vehicle and tax
entity;
(h) maintain at least one operating account of the Borrower
and the Guarantor with the Agent; and
(i) take all steps reasonably necessary to cause any and all payments
due to any third party under any management fee agreements with respect
to the Collateral Properties to be subordinated in full in writing to
the prior payment of the Revolving Credit Loans during the continuance
of a Default or an Event of Default, each on terms and conditions
reasonably satisfactory the Agent in all respects.
ss8. NEGATIVE COVENANTS. The Borrower and the Guarantor jointly and
severally agree that until the termination of the Commitment and the payment and
satisfaction in full of all the Obligations, the Borrower and the Guarantor will
not, and will not permit any of their respective Subsidiaries to,:
(a) create, incur or assume any Indebtedness other than (i)
Indebtedness to the Agent and the Banks arising under the Loan
Documents, (ii) Indebtedness in respect of the acquisition of personal
property which does not exceed $500,000 in aggregate amount for the
Borrower, the Guarantor and their respective Subsidiaries, (iii)
current liabilities not incurred through the borrowing of money or the
obtaining of credit except credit on an open account customarily
extended, (iv) Indebtedness in respect of taxes or other governmental
charges contested in good faith and by appropriate proceedings; (v)
Indebtedness of the Borrower or any of its Subsidiaries, the payment of
which is without recourse to the Borrower or such Subsidiary, incurred
in connection with the acquisition of Real Estate Assets (other than
the Collateral Properties) or the financing or refinancing of any
permitted Indebtedness secured by liens on such Real Estate Assets;
(vi) additional recourse Indebtedness of the Borrower or the Guarantor
in an aggregate principal amount not in excess of $445,000 at any time;
(vii) Indebtedness of the Borrower and the Guarantor to First Union
Bank of Connecticut in an aggregate principal amount not in excess of
$8,980,000; (viii) Indebtedness of the Borrower and/or any of its
Subsidiaries and/or any of the Guarantor's subsidiaries due and owing
to Citicorp Real Estate, Inc. in an aggregate principal amount not in
excess of $15,084,000 at any time and (ix) existing Indebtedness (and
any refinancing of such Indebtedness that does not increase the
outstanding principal amount of such Indebtedness) not included above
and listed on Schedule 8(a)(ix) hereto; provided, that the Banks agree
to use reasonable efforts to respond to any written request of the
Borrower to amend the limitation on additional recourse Indebtedness
set forth in ss.8(a)(vi) above within thirty (30) days of their receipt
thereof;
(b) create or incur any Liens on any property or assets of the
Borrower, the Guarantor or any of their respective Subsidiaries except
(i) Liens securing the Obligations; (ii) Liens securing taxes or other
governmental charges not yet due; (iii) deposits or pledges made in
connection with social security obligations; (iv) Liens of carriers,
warehousemen, mechanics and materialmen, less than 120 days old as to
obligations not yet due; (v) easements, rights-of-way, zoning
restrictions and similar minor Liens which individually and in the
aggregate do not have a Materially Adverse Effect; (vi) purchase money
security interests in personal property securing purchase money
Indebtedness permitted by Section 8(a)(ii), covering only the personal
property so acquired; (vii) mortgage liens on, pledges of and security
interests in (A) the Real Estate Assets other than the Collateral
Properties acquired with Indebtedness permitted by Section 8(a)(v), (B)
any personal property of the Borrower, the Guarantor or such Subsidiary
directly related or appurtenant to such Real Estate Assets and (C) if,
and only if, the applicable Subsidiary that incurs such permitted
Indebtedness and grants such liens on such Real Estate Assets and
related personal property is a special purpose entity that owns only
the Real Estate Assets and personal property that secure the applicable
permitted Indebtedness, the outstanding equity interests of such
Subsidiary, in each case that secure such Indebtedness and cover only
the Real Estate Assets and personal property directly related or
appurtenant to such Real Estate Assets so acquired and equity
interests; (viii) liens securing the payment of Indebtedness permitted
by ss.8(a)(vi) hereof that encumber only the Real Estate Asset acquired
with the initial proceeds of such Indebtedness; (ix) Liens securing the
payment of the Indebtedness permitted by ss.8(a)(vii) hereof covering
only the Real Estate Assets and personal property directly related or
appurtenant to such Real Estate Assets described in more detail on
Schedule 8(b)(ix) attached hereto; (x) liens securing the payment of
Indebtedness permitted by ss.8(b)(viii) hereof that encumber only the
Real Estate Assets and personal property directly related or
appurtenant to such Real Estate Assets described on Schedule 8(b)(x)
attached hereto; and (xi) other Liens existing on the date hereof and
listed on Schedule 8(b)(xi) hereto;
(c) make any Investments other than investments in (i) marketable
obligations of the United States maturing within one (1) year, (ii)
certificates of deposit, bankers' acceptances and time, money market
and demand deposits of United States Federal and state chartered banks
having total assets in excess of $1,000,000,000, (iii) as long as no
Default or Event of Default shall have occurred and be continuing or
would result therefrom Investments consisting of (A) all of the issued
and outstanding capital stock of, or equity interests in, a Subsidiary
of the Borrower or (B) a majority of the capital stock of or equity
interests in a Partially-Owned Real Estate Holding Entity, (iv) any
other investments made by the Guarantor in the ordinary course of the
Guarantor's business in a manner consistent with past practice if such
investments qualify under Section 856(c)(5)(A) of the Code (or any
successor regulation thereto), for purposes of inclusion in the "75%
asset test" relating to the Guarantor's status as a REIT; provided,
that the Guarantor may not make any investments in other REITs, unless
such Investment in any single REIT does not exceed more than fifteen
percent (15%) of the Guarantor's total assets, determined in accordance
with GAAP and provided, further, that the aggregate value of all
Investments under this subsection (c)(iv) shall not exceed at any time
thirty percent (30%) of the total assets of the Guarantor, determined
in accordance with the Code and the regulations promulgated thereunder,
(v) investments in respect of Acquisition Properties or other Real
Estate Assets acquired by the Borrower after the date hereof in
accordance with the terms of this Agreement; (vi) intercompany loans
provided by the Borrower to the Guarantor solely in connection with
stock repurchase arrangements of the Guarantor; or (vii) such other
investments as the Agent may from time to time approve in writing;
(d) become party to a merger, or to effect any disposition of any
properties or assets other than by the Guarantor, the Borrower or any
of their respective Subsidiaries in the ordinary course of their
respective businesses as a REIT or as a Subsidiary of a REIT, or to
purchase or otherwise acquire assets other than the acquisition of
Acquisition Properties or other Real Estate Assets or the making of
Investments in accordance with the terms hereof and the purchase of
personal property in the ordinary course of their respective
businesses;
(e) in the case of the Borrower, make (A) annual Distributions in
excess of ninety percent (90%) of Funds from Operations or (B) any
Distributions during any period when any Event of Default has occurred
and is continuing or would result therefrom; provided, however, that
the Borrower may at all times make Distributions to the extent (after
taking into account all available funds of the Guarantor from all other
sources) required in order to enable the Guarantor to continue to
qualify as a REIT.
(ii) In the case of the Guarantor, during any period when any Event
of Default has occurred and is continuing, make any
Distributions in excess of the Distributions required to be
made by the Guarantor in order to maintain its status as a
REIT;
(f) cause or permit (a) the occupancy for all Units in the
Collateral Properties (under valid and enforceable Leases with bona
fide, third party tenants) to be less than ninety percent (90%) of all
such Units at any time or (b) the occupancy for all Units in any
individual Collateral Property (under valid and enforceable Leases with
bona fide, third party tenants) to be less than eighty percent (80%) of
all such Units at any time; or
(g) at any time cause or permit any of the Partnership Documents
to be modified, amended or supplemented in any respect whatsoever,
without (in each case) the express prior written consent or approval of
the Agent, if such changes would affect the Guarantor's REIT status or
otherwise materially adversely affect the rights of the Agent and the
Banks hereunder or under any other Loan Document.
ss9. FINANCIAL COVENANTS. The Borrower and the Guarantor jointly and
severally agree that until the termination of the Commitment and the payment and
satisfaction in full of all the Obligations, the Borrower and the Guarantor will
not:
(a) cause or permit the outstanding principal amount of the
Revolving Credit Loans to exceed sixty percent (60%) of the Appraised
Value of the Collateral Properties at any time; provided, that, the
Borrower shall have the right to either (i) pay down the outstanding
principal amount of the Revolving Credit Loans, or (ii) grant to the
Agent on behalf of the Banks valid and perfected first mortgage liens,
pursuant to mortgages in form and substance satisfactory to the Agent,
on additional Real Estate Assets on which all real estate due diligence
requirements referred to in ss.2 hereof have been met, in each case in
order to cure the Borrower's failure to comply with this ss.9(a) within
the time period referred to in ss.12.1(c) hereof;
(b) cause or permit the ratio of Collateral Operating Cash Flow to
Pro Forma Debt Service Charges to be less than 1.6 to 1.0 for (i) the
fiscal quarter of the Borrower ending on June 30, 1997, (ii) the period
of two consecutive fiscal quarters of the Borrower ending on September
30, 1997, (iii) the period of three consecutive fiscal quarters of the
Borrower ending on December 31, 1997 and (iv) any period of four (4)
consecutive fiscal quarters of the Borrower ending on or after March
31, 1998;
(c) cause or permit the ratio of Total Liabilities to Tangible Net
Worth to exceed 1.25:1.00 for any fiscal quarter of the Guarantor
ending after the Closing Date.
(d) cause or permit the ratio of Operating Cash Flow to Total Debt
Service for the Guarantor to be less than 2.0 to 1.0 for (i) the fiscal
quarter of the Guarantor ending on June 30, 1997, (ii) the period of
two consecutive fiscal quarters of the Guarantors ending on September
30, 1997, (iii) the period of three consecutive fiscal quarters of the
Guarantor ending on December 31, 1997 and (iv) any period of four (4)
consecutive fiscal quarters of the Guarantor ending on or after March
31, 1998.
ss.10. CONDITIONS TO THE CLOSING DATE. The obligations of the Banks to
enter into this Agreement shall be
subject to the satisfaction of the following conditions precedent on or prior to
March 28, 1997:
ss10.1. Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto and shall be in full
force and effect.
ss10.2. Certified Copies of Organization Documents. The Agent shall
have received (i) from the Borrower a copy, certified as of a recent date by a
duly authorized officer of the Guarantor, in its capacity as general partner of
the Borrower, to be true and complete, of the Agreement of Limited Partnership
of the Borrower and any other agreement governing the rights of the partners of
the Borrower, (ii) from the Guarantor a copy, certified as of a recent date by
the appropriate officer of the State of Maryland to be true and correct, of the
corporate charter of the Guarantor and (iii) from each Additional Guarantor
copies of such Additional Guarantor's Charter Documents, in each case along with
any other organization documents of the Borrower or the Guarantor or the
Additional Guarantors, as the case may be, and each as in effect on the date of
such certification.
ss10.3. By-Laws; Resolutions. All action on the part of the Borrower, the
Guarantor and the Additional Guarantors necessary for the valid execution,
delivery and performance by the Borrower, the Guarantor and the Additional
Guarantors of this Agreement and the other Loan Documents to which any of them
is or is to become a party shall have been duly and effectively taken, and
evidence thereof satisfactory to the Banks shall have been provided to the
Agent. The Agent shall have received from the Guarantor, for itself and in its
capacity as general partner of the Borrower and the Additional Guarantors, true
copies of its by-laws and the resolutions adopted by its board of directors
authorizing the transactions described herein and evidencing the due
authorization, execution and delivery of the Loan Documents to which it and/or
the Borrower or the Additional Guarantors is a party, each certified by the
secretary as of a recent date to be true and complete.
ss10.4. Incumbency Certificate; Authorized Signers. The Agent shall have
received from the Guarantor for itself and as general partner of the Borrower
and the Additional Guarantors, an incumbency certificate, dated as of the
Closing Date, signed by a duly authorized officer of the Guarantor and giving
the name and bearing a specimen signature of each individual who shall be
authorized: (a) to sign, in the name and on behalf of the Borrower, the
Guarantor and the Additional Guarantors, as the case may be, each of the Loan
Documents to which the Borrower or the Guarantor or any of the Additional
Guarantors is or is to become a party; (b) to make Loan and Conversion Requests
on behalf of the Borrower; and (c) to give notices and to take other action on
behalf of the Borrower or the Guarantor or the Additional Guarantors, as
applicable, under the Loan Documents.
ss10.5. Validity of Liens. The Security Documents shall be effective to
create, on the Closing Date or, if earlier, on the date such Security Documents
are recorded or filed with the appropriate offices, in favor of the Agent, on
behalf of the Banks, a legal, valid and enforceable first (except for Permitted
Liens entitled to priority under applicable law) security interest in the
Collateral. All filings, recordings, deliveries of instruments and other actions
necessary or desirable in the reasonable opinion of the Agent to protect and
preserve such security interests shall have been duly executed, and ready to be
effected on or prior to the Closing Date. The Agent shall have received evidence
thereof in form and substance reasonably satisfactory to the Agent.
ss10.6. Surveys and Taxes. The Agent shall have received (a) a Survey
of each of the Initial Collateral Properties, together with the applicable
Surveyor Certificate, bearing dates acceptable to the Agent, and in form and
substance acceptable to the Agent, and (b) evidence of payment of real estate
taxes and municipal charges on the Initial Collateral Properties which are or
will become due and payable on or before the Closing Date.
ss10.7. Title Insurance; Title Exception Documents. The Agent (on
behalf of the Banks) shall have received the Title Policies. The Agent (on
behalf of the Banks) shall have received true and accurate copies of all
documents listed as exceptions under each Title Policy.
ss10.8. Leases, Service Contracts, and Other Documents. The Agent shall
have received from the Borrower Lease Summaries, all material Service
Agreements, and all Partnership Documents.
<PAGE>
ss10.9. Estoppel Agreements; Subordination, Attornment and
Non-Disturbance Agreements. The Agent shall have received (a) Subordination,
Attornment and Non-Disturbance Agreements, in form and substance satisfactory to
the Agent, and (b) Estoppel Agreements in form and substance satisfactory to the
Agent, in each case from each of the commercial tenants under the Leases which
occupy more than five percent (5%) square feet of gross rentable area of any of
the Collateral Properties.
ss10.10. Certificates of Insurance. The Agent shall have received (a)
current certificates of insurance as to all of the insurance maintained by
Borrower on the Initial Collateral Properties (including flood insurance if
necessary) from the insurer or an independent insurance broker, identifying
insurers, types of insurance, insurance limits, and policy terms and insurance
binders naming the Agent as Mortgagee, loss payee and additional insured; (b)
certified copies of all policies evidencing such insurance (or certificates
therefor signed by the insurer or an agent authorized to bind the insurer); and
(c) such further information and certificates from Borrower, its insurers and
insurance brokers as the Agent may reasonably request.
ss10.11. Hazardous Substance Assessments. The Agent shall have
received hazardous waste site assessment reports running in favor of the Agent
and the Banks concerning Hazardous Substances (or the threat thereof) and
asbestos with respect to the Initial Collateral Properties, dated as of a date
satisfactory to the Banks, from environmental engineers acceptable to the Agent,
such reports to be in form and substance satisfactory to the Agent and each of
the Banks. The Agent shall have the right to obtain third-party review of the
reports at the Borrower's expense.
ss10.12. Opinion of Counsel Concerning Organization and Loan
Documents. Each of the Banks and the Agent shall have received favorable
opinions addressed to the Banks and the Agent in form and substance satisfactory
to the Banks and the Agent from Cohn & Birnbaum, as counsel to the Borrower, the
Guarantor, the Additional Guarantors and their respective subsidiaries.
ss10.13. Appraisals. The Agent and each of the Banks shall have
received Appraisals dated as of a date satisfactory to the Banks for each of the
Initial Collateral Properties in form and substance satisfactory to the Agent
and each of the Banks (which Appraisals are subject to review by the Agent and
the Banks in accordance with the terms hereof). The Agent shall have the right
to obtain third-party review of the Appraisals at the Borrower's expense.
ss.10.14. [Intentionally Omitted.
ss10.15. Structural Condition Assurances. The Agent and each of the Banks
shall have received evidence satisfactory to the Agent and each of the Banks as
to the good physical condition of the Buildings and that utilities and public
water and sewer service is available at the lot lines of the Initial Collateral
Properties and connected directly to the Buildings with all necessary Permits.
ss10.16. Permit Assurances; Compliance. The Agent shall have received
evidence reasonably satisfactory to the Agent that (i) all activities being
conducted on the Initial Collateral Properties which require federal, state or
local Permits have been duly licensed and that such Permits are in full force
and effect, and (ii) the Initial Collateral Properties are in compliance with
all zoning, land use, environmental, architectural access, historical and
building laws.
ss10.17. Guaranty. The Guaranty shall have been duly executed and delivered
by the Guarantor. The Additional Guaranties shall have been duly executed and
delivered by the Additional Guarantors.
ss10.18. Fiancial Analysis of Initial Collateral properties. Each of the
Banks shall have completed to its satisfaction, a financial analysis of each
Initial Collateral Property, which analysis shall include, without limitation, a
review, with respect to each Initial Collateral Property, of (i) the most recent
rent rolls, (ii) three (3) year historical and projected operating statements,
(iii) cash flow projections, (iv) capital expenditure budgets (which shall be
subject to the review and approval of each of the Banks), (v) market data, (vi)
Lease Summaries, (vii) tenant financial statements, to the extent available for
commercial tenants, and (viii) an aging of rent payments and rent payment
histories for each tenant.
ss10.19. Inspection of Collateral Properties. The Agent and each Bank shall
have completed to its satisfaction an
inspection of the Initial Collateral Properties at the Borrower's expense.
ss10.20. Certifications from Government Officials; UCC-11 Reports. The
Agent shall have received (i) long-form certifications from government officials
evidencing the legal existence, good standing and foreign qualification of the
Borrower, the Guarantor and each of the Additional Guarantors, along with a
certified copy of the certificate of limited partnership of the Borrower and the
Additional Guarantors, all as of the most recent practicable date; and (ii)
UCC-11 search results from the appropriate jurisdictions for the Borrower, the
Guarantor and the Additional Guarantors.
ss10.21. Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Agreement, the other Loan Documents
and all other documents incident thereto shall be reasonably satisfactory in
form and substance to each of the Banks and to the Agent's counsel, and the
Agent, each of the Banks and such counsel shall have received all information
and such counterpart originals or certified or other copies of such documents as
the Agent may reasonably request.
ss10.22. Fees. The Borrower shall have paid to the Agent, for the accounts
of the Banks or for its own account, as applicable, all of the fees and expenses
that are due and payable as of the Closing Date in accordance with this
Agreement.
ss10.23. Closing Certificate. The Borrower and the Guarantor shall have
delivered a Closing
Certificate to the Agent, the form of which is attached hereto as Exhibit H.
ss10.24. Consolidation Transactions. The Agent shall have received evidence
satisfactory to the Agent that
the Guarantor shall have consummated the consolidation transactions referred to
in the Proxy Materials.
ss11. CONDITIONS TO ALL BORROWINGS. The obligations of the Banks to make
any Revolving Credit Loan, whether on or after the Closing Date, shall also be
subject to the satisfaction of the following conditions precedent:
ss11.1. Representations True; No Event of Default; Compliance Certificate.
Each of the representations and warranties of the Borrower, the Guarantor and
the Additional Guarantors contained in this Agreement, the other Loan Documents
or in any document or instrument delivered pursuant to or in connection with
this Agreement shall be true as of the date as of which they were made and shall
also be true at and as of the time of the making of each Revolving Credit Loan,
with the same effect as if made at and as of that time (except to the extent of
changes resulting from transactions contemplated or not prohibited by this
Agreement or the other Loan Documents and changes occurring in the ordinary
course of business, and except to the extent that such representations and
warranties relate expressly to an earlier date); and no Default or Event of
Default under this Agreement shall have occurred and be continuing on the date
of any Loan Request or on the Drawdown Date of any Revolving Credit Loan. Each
of the Banks shall have received a certificate of the Borrower signed by an
authorized officer of the Borrower as provided in ss.2.5(d)(iii).
ss11.2. Date Down Endorsement. If reasonably necessary to insure the
priority of the mortgage liens of the Agent, the Agent shall have received
datedown endorsements to all of the Title Policies that there have been no
changes to the title to or encumbrances upon the Collateral Properties, other
than as may have been permitted pursuant to this Agreement.
ss11.3. No Legal Impediment. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of the Agent or any Bank would make it illegal for any Bank to make such Loan.
ss11.4. Governmental Regulation. Each Bank shall have received such
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
ss.12. EVENTS OF DEFAULT; ACCELERATION; ETC.
ss12.1. EVENTS OF DEFAULT; ACCELERATION. If any of the following events
("Events of Default") shall occur: (a) the Borrower shall fail to pay (i) when
due and payable any principal of or interest on the Revolving Credit Loans or
(ii) any other sum due under any of the Loan Documents within five (5) days
following written demand for payment of the same; (b) the Borrower or the
Guarantor shall fail to perform any term, covenant or agreement contained in
Section 8 or 9 (other than the covenant set forth in ss.9(a) hereof); (c) the
Borrower shall fail to perform the covenant set forth in ss.9(a) hereof and such
failure shall continue for thirty (30) days after the Bank has given written
notice of such failure to the Borrower pursuant to ss.18 hereof; (d) the
Borrower or the Guarantor or any Additional Guarantor shall fail to perform any
other term, covenant or agreement contained in the Loan Documents and such
failure shall continue for thirty (30) days after the Bank has given written
notice of such failure to the Borrower; provided, that if any such failure is of
a nature that it cannot be corrected within such thirty (30) day period but is
capable of being corrected within an additional twenty (20) period, such failure
shall not constitute an Event of Default hereunder so long as (i) the Borrower
or the Guarantor or such Additional Guarantor, as applicable, institutes
reasonable curative action within such initial period and diligently pursues
such action to completion and (ii) such failure shall be fully cured within such
additional twenty (20) day period; (e) any representation or warranty of the
Borrower or the Guarantor or any Additional Guarantor in any of the Loan
Documents or in any certificate or notice given in connection therewith shall
have been false or misleading in any material respect at the time made or deemed
to have been made; (f) the Borrower or the Guarantor or any Additional Guarantor
shall be in default beyond the expiration of any applicable grace period under
any environmental, financial or payment covenant set forth in any agreement or
agreements evidencing Indebtedness owing to the Bank or any affiliates of the
Bank or other Indebtedness in excess of $1,000,000 in aggregate principal
amount, or shall fail to pay such Indebtedness when due, subject to any
applicable period of grace; (g) any of the Loan Documents shall cease to be in
full force and effect, (h) the Borrower, the Guarantor, any Additional Guarantor
or any of their respective Subsidiaries (i) shall make an assignment for the
benefit of creditors, (ii) shall be adjudicated bankrupt or insolvent, (iii)
shall seek the appointment of, or be the subject of an order appointing, a
trustee, liquidator or receiver as to all or part of its assets, (iv) shall
commence, approve or consent to, any case or proceeding under any bankruptcy,
reorganization or similar law and, in the case of an involuntary case or
proceeding, such case or proceeding is not dismissed within thirty (30) days
following the commencement thereof, or (v) shall be the subject of an order for
relief in an involuntary case under federal bankruptcy law; (i) the Borrower or
the Guarantor or any Additional Guarantor shall be unable to pay its debts as
they mature; (j) there shall remain undischarged for more than ten (10) days any
final (beyond any applicable appeal period) judgment or execution action against
the Borrower or the Guarantor or any Additional Guarantor (not covered by
insurance reasonably satisfactory to the Agent) that, together with other
outstanding claims (not covered by insurance reasonably satisfactory to the
Agent) and execution actions against the Borrower or the Guarantor or such
Additional Guarantor exceeds $1,000,000 in the aggregate; or (k) the Guarantor
shall cease to be the general partner of the Borrower at any time:
then, and in any such event, so long as the same may be continuing, the
Agent may, and upon the request of the Majority Banks shall, by notice in
writing to the Borrower, declare all amounts owing with respect to this
Agreement, the Revolving Credit Notes and the other Loan Documents to be, and
they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower and the Guarantor; provided that in the
event of any Event of Default specified in ss.12.1(h) or 12.1(i), all such
amounts shall become immediately due and payable automatically and without any
requirement of notice from any of the Banks or the Agent or action by the Banks
or the Agent.
ss12.2. Termination of Commitments. If any one or more Events of Default
specified in ss.12.1(h) or ss.12.1(i) shall occur, any unused portion of the
Commitments hereunder shall forthwith terminate and the Banks shall be relieved
of all obligations to make Revolving Credit Loans to the Borrower. If any other
Event of Default shall have occurred and be continuing, the Majority Banks may,
by notice to the Borrower, terminate the unused portion of the Total Commitment
hereunder, and upon such notice being given such unused portion of the Total
Commitment shall terminate immediately and the Banks shall be relieved of all
further obligations to make Revolving Credit Loans. No such termination of the
Total Commitment hereunder shall relieve the Borrower of any of the Obligations
or any of its existing obligations to any Bank arising under other agreements or
instruments.
ss12.3 Remedies. In the event that one or more Events of Default shall have
occurred and be continuing, whether or not the Banks shall have accelerated the
maturity of the Revolving Credit Loans pursuant to ss.12.1, the Majority Banks
may direct the Agent to proceed to protect and enforce the rights and remedies
of the Agent and the Banks under this Agreement, the Revolving Credit Notes, any
or all of the other Loan Documents or under applicable law by suit in equity,
action at law or other appropriate proceeding (including for the specific
performance of any covenant or agreement contained in this Agreement or the
other Loan Documents or any instrument pursuant to which the Obligations are
evidenced and, to the full extent permitted by applicable law, the obtaining of
the ex parte appointment of a receiver), and, if any amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right or remedy of the Agent and the Banks under the
Loan Documents or applicable law. No remedy herein conferred upon the Banks or
the Agent or the holder of any Revolving Credit Note is intended to be exclusive
of any other remedy and each and every remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or under any of the other Loan
Documents or now or hereafter existing at law or in equity or by statute or any
other provision of law.
ss12.4. Distribution of Collateral Proceeds. In the event that,
following the occurrence and during the continuance of any Default or Event of
Default, the Agent or any Bank, as the case may be, receives any monies in
connection with the enforcement of any of the Security Documents, or otherwise
with respect to the realization upon any of the Collateral, such monies shall be
distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of, the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies
by the Agent, for the exercise, protection or enforcement by the Agent
of all or any of the rights, remedies, powers and privileges of the
Agent or the Banks under this Agreement or any of the other Loan
Documents or in respect of the Collateral or in support of any
provision of adequate indemnity to the Agent against any taxes or liens
which by law shall have, or may have, priority over the rights of the
Agent to such monies;
(b) Second, to all other Obligations pro rata based upon the amount
of the Obligations due each of the Agent and the Banks; and provided,
further, that the Agent may in its discretion make proper allowance to
take into account any Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the Majority Banks of
all of the Obligations, to the payment of any obligations required to
be paid pursuant to ss.9-504(1)(c) of the Uniform Commercial Code of
the State of Connecticut or any similar law; and
(d) Fourth, the excess, if any, shall be returned to the
Borrower or to such other Persons as are entitled thereto.
ss13. SETOFF. Regardless of the adequacy of any Collateral and without
demand or notice, during the continuance of any Event of Default, any deposits
in any account (general or specific, time or demand, provisional or final,
regardless of currency, maturity, or the branch at which such deposits are held
in the possession of the Agent or a Bank may be applied to or set off against
the payment of the Obligations. Each of the Banks agrees with each other Bank
that (a) if pursuant to any agreement between such Bank and the Borrower (other
than this Agreement or any other Loan Document), an amount to be set off is to
be applied to Indebtedness of the Borrower to such Bank, other than with respect
to the Obligations, such amount shall be applied ratably to such other
Indebtedness and to the Obligations, and (b) if such Bank shall receive from the
Borrower, whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross action, enforcement of the Obligations by proceedings
against the Borrower at law or in equity or by proof thereof in bankruptcy,
reorganization, liquidation, receivership or similar proceedings, or otherwise,
and shall retain and apply to the payment of the Revolving Credit Note or
Revolving Credit Notes held by such Bank any amount in excess of its ratable
portion of the payments received by all of the Banks with respect to the
Revolving Credit Notes held by all of the Banks, such Bank will make such
disposition and arrangements with the other Banks with respect to such excess,
either by way of distribution, pro tanto assignment of claims, subrogation or
otherwise, as shall result in each Bank receiving in respect of the Revolving
Credit Notes held by it its proportionate payment as contemplated by this
Agreement; provided that if all or any part of such excess payment is thereafter
recovered from such Bank, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
Notwithstanding the foregoing, no Bank shall exercise a right of setoff if such
exercise would limit or prevent the exercise of any other remedy, right to
Collateral or other recourse against the Borrower.
<PAGE>
4. THE AGENT.
ss.14.1. Authorization.
(a) The Agent is authorized to take such action on behalf of each
of the Banks and to exercise all such powers as are hereunder and under
any of the other Loan Documents and any related documents delegated to
the Agent, together with such powers as are reasonably incident
thereto, provided that no duties or responsibilities not expressly
assumed herein or therein shall be implied to have been assumed by the
Agent. The relationship between the Agent and the Banks is and shall be
that of agent and principal only, and nothing contained in this
Agreement or any of the other Loan Documents shall be construed to
constitute the Agent as a trustee or fiduciary for any Bank.
(b) The Borrower, without further inquiry or investigation, shall,
and is hereby authorized by the Banks to, assume that all actions taken
by the Agent hereunder and in connection with or under the Loan
Documents are duly authorized by the Banks. The Banks shall notify
Borrower of any successor to Agent by a writing signed by Majority
Banks, which successor shall be reasonably acceptable to the Borrower.
ss14.2. Employees and Agents. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Agreement and the other Loan Documents. The Agent
may utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
ss14.3. No Liability. Neither the Agent, nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent may be liable
for losses due to its willful misconduct or gross negligence.
ss14.4. No Representations. The Agent shall not be responsible for the
execution or validity or enforceability of this Agreement, the Revolving Credit
Notes, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the Revolving
Credit Notes, or for the value of any such collateral security or for the
validity, enforceability or collectibility of any such amounts owing with
respect to the Revolving Credit Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan Documents
or in any certificate or instrument hereafter furnished to it by or on behalf of
the Guarantor or the Borrower or any of their respective Subsidiaries, or be
bound to ascertain or inquire as to the performance or observance of any of the
terms, conditions, covenants or agreements in this Agreement, the other Loan
Documents or in any instrument at any time constituting, or intended to
constitute, collateral security for the Obligations. The Agent shall not be
bound to ascertain whether any notice, consent, waiver or request delivered to
it by the Borrower or the Guarantor or any holder of any of the Revolving Credit
Notes shall have been duly authorized or is true, accurate and complete. The
Agent has not made nor does it now make any representations or warranties,
express or implied, nor does it assume any liability to the Banks, with respect
to the credit worthiness or financial condition of the Borrower or any of its
Subsidiaries or the Guarantor or any of the Subsidiaries or any tenant under a
Lease or any other entity. Each Bank acknowledges that it has, independently and
without reliance upon the Agent or any other Bank, and based upon such
information and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.
ss.14.5. Payments.
(a) A payment by the Borrower to the Agent hereunder or any of the
other Loan Documents for the account of any Bank shall constitute a
payment to such Bank. The Agent agrees to distribute to each Bank such
Bank's pro rata share of payments received by the Agent for the account
of the Banks, as provided herein or in any of the other Loan Documents.
All such payments shall be made on the date received, if before 2:00
p.m., and if after 2:00 p.m., on the next Business Day. If payment is
not made on the day received, the funds shall be invested by the Agent
in overnight obligations, and interest thereon paid pro rata to the
Banks.
(b) If in the reasonable opinion of the Agent the distribution of
any amount received by it in such capacity hereunder, under the
Revolving Credit Notes or under any of the other Loan Documents might
involve it in material liability, it may refrain from making
distribution until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction, provided that the
Agent shall invest any such undistributed amounts in overnight
obligations on behalf of the Banks and interest thereon shall be paid
pro rata to the Banks. If a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Agent is to be
repaid, each Person to whom any such distribution shall have been made
shall either repay to the Agent its proportionate share of the amount
so adjudged to be repaid or shall pay over the same in such manner and
to such Persons as shall be determined by such court.
(c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Bank that fails (i)
to make available to the Agent its pro rata share of any Revolving
Credit Loan or (ii) to comply with the provisions of ss.14 with respect
to making dispositions and arrangements with the other Banks, where
such Bank's share of any payment received, whether by setoff or
otherwise, is in excess of its pro rata share of such payments due and
payable to all of the Banks, in each case as, when and to the full
extent required by the provisions of this Agreement, or to adjust
promptly such Bank's outstanding principal and its pro rata Commitment
Percentage as provided in ss.2.1, shall be deemed delinquent (a
"Delinquent Bank") and shall be deemed a Delinquent Bank until such
time as such delinquency is satisfied. A Delinquent Bank shall be
deemed to have assigned any and all payments due to it from the
Borrower, whether on account of outstanding Revolving Credit Loans,
interest, fees or otherwise, to the remaining nondelinquent Banks for
application to, and reduction of, their respective pro rata shares of
all outstanding Revolving Credit Loans. The Delinquent Bank hereby
authorizes the Agent to distribute such payments to the nondelinquent
Banks in proportion to their respective pro rata shares of all
outstanding Revolving Credit Loans. If not previously satisfied
directly by the Delinquent Bank, a Delinquent Bank shall be deemed to
have satisfied in full a delinquency when and if, as a result of
application of the assigned payments to all outstanding Revolving
Credit Loans of the nondelinquent Banks, the Banks' respective pro rata
shares of all outstanding Revolving Credit Loans have returned to those
in effect immediately prior to such delinquency and without giving
effect to the nonpayment causing such delinquency.
ss14.6. Holders of Revolving Credit Notes. The Agent may deem and treat
the payee of any Revolving Credit Notes as the absolute owner or purchaser
thereof for all purposes hereof until it shall have been furnished in writing
with a different name by such payee or by a subsequent holder, assignee or
transferee.
ss14.7. Indemnity. The Banks ratably and severally agree hereby to
indemnify and hold harmless the Agent from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent has not been reimbursed by
the Borrower as required by ss.18), and liabilities of every nature and
character arising out of or related to this Agreement, the Revolving Credit
Notes, or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence.
ss14.8. Agent as Bank. In its individual capacity as a Bank, Rhode
Island Hospital Trust National Bank shall have the same obligations and the same
rights, powers and privileges in respect to its Commitment and the Revolving
Credit Loans made by it, and as the holder of any of the Revolving Credit Notes,
as it would have were it not also the Agent.
ss14.9 Notification of Defaults and Events of Default. Each Bank
hereby agrees that, upon learning of the existence of a default, Default or an
Event of Default, it shall (to the extent notice has not previously been
provided) promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this ss.14.9 it shall promptly notify the other
Banks of the existence of such default, Default or Event of Default.
ss14.10. Duties in the Case of Enforcement. In case one of more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (a) so requested by
the Majority Banks and (b) the Banks have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of this Agreement and the
Security Documents authorizing the sale or other disposition of all or any part
of the Collateral and exercise all or any such other legal and equitable and
other rights or remedies as it may have in respect of such Collateral and
enforcement of the Banks' rights against the Borrower and the Guarantor under
this Agreement and the other Loan Documents. The Majority Banks may direct the
Agent in writing as to the method and the extent of any such sale or other
disposition, the Banks (including any Bank which is not one of the Majority
Banks) hereby agreeing to ratably and severally indemnify and hold the Agent
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Agent need not
comply with any such direction to the extent that the Agent reasonably believes
the Agent's compliance with such direction to be unlawful or commercially
unreasonable in any applicable jurisdiction.
ss14.11. Successor Agent. Rhode Island Hospital Trust National Bank, or any
successor Agent, may resign as Agent at any time by giving written notice
thereof to the Banks and to the Borrower. In addition, the Majority Banks may
remove the Agent in the event of the Agent's willful misconduct or gross
negligence. Any such resignation or removal shall be effective upon appointment
and acceptance of a successor Agent, as hereinafter provided. Upon any such
resignation or removal, the Majority Banks shall have the right to appoint a
successor Agent, provided that, unless a Default or an Event of Default shall
have occurred and be continuing, the Borrower shall have the right to approve
any successor Agent, which approval shall not be unreasonably withheld. If, in
the case of a resignation by the Agent, no successor Agent shall have been so
appointed by the Majority Banks and approved by the Borrower, and shall have
accepted such appointment, within thirty (30) days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf of the
Banks, appoint any one of the other Banks as a successor Agent. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Agent, and the
retiring or removed Agent shall be discharged from all further duties and
obligations as Agent under this Agreement. After any Agent's resignation or
removal hereunder as Agent, the provisions of this ss.14 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement. The Agent agrees that it shall not assign any of its
rights or duties as Agent to any other Person.
ss14.12. Notices. Any notices or other information required hereunder
to be provided to the Agent shall be forwarded by the Agent to each of the Banks
on the same day (if practicable) and, in any case, on the next Business Day
following the Agent's receipt thereof. The Agent's receipt of such notice shall
be deemed to constitute receipt by the Banks of any such notice.
ss.15. ASSIGNMENT; PARTICIPATIONS; ETC.
ss15.1. Conditions to Assignments by Banks. Except as provided herein, each
Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of its Commitment Percentage and Commitment and the same portion of the
Revolving Credit Loans at the time owing to it) and the Revolving Credit Notes
held by it; provided that (a) the Agent and, unless a Default or an Event of
Default shall have occurred and be continuing, the Borrower each shall have the
right to approve any Eligible Assignee, which approval shall not be unreasonably
withheld, it being agreed that the Agent and the Borrower must approve or reject
a proposed Eligible Assignee within seven (7) days of receiving a written
request from any Bank for such approval and if the Agent or the Borrower fails
to respond within such seven (7) day period, such request for approval shall be
deemed approved by the Agent or the Borrower, or both, as the case may be, (b)
each such assignment shall be of a constant, and not a varying, percentage of
all the assigning Bank's rights and obligations under this Agreement, (c)
subject to the provisions of ss.2.3 hereof, each Bank shall have at all times an
amount of its Commitment of not less than $8,000,000 and (d) the parties to such
assignment shall execute and deliver to the Agent, for recording in the Register
(as hereinafter defined), an assignment and assumption, substantially in the
form of Exhibit I hereto (an "Assignment and Assumption"), together with any
Revolving Credit Notes subject to such assignment. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Assumption, which effective date shall be at least five
(5) Business Days after the execution thereof, (i) the assignee thereunder shall
be a party hereto and, to the extent provided in such Assignment and Assumption,
have the rights and obligations of a Bank hereunder and thereunder, and (ii) the
assigning Bank shall, to the extent provided in such assignment and upon payment
to the Agent of the registration fee referred to in ss.15.3, be released from
its obligations under this Agreement. Any such Assignment and Assumption shall
run to the benefit of the Borrower and a fully executed copy of any such
Assignment and Assumption shall be delivered by the Assignor to the Borrower.
ss15.2. Certain Representations and Warranties: Limitations; Covenants. By
executing and delivering an Assignment and Assumption, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows: (a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto; (b) the assigning Bank makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower and its Subsidiaries or the Guarantor or any other Person
primarily or secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrower and its Subsidiaries or the Guarantor
or any other Person primarily or secondarily liable in respect of any of the
Obligations of any of their obligations under this Agreement or any of the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto or the validity or enforceability or priority of any lien or any
Collateral; (c) such assignee confirms that it has received a copy of this
Agreement, together with copies of such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Assumption; (d) such assignee will, independently and
without reliance upon the assigning Bank, the Agent or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit and Collateral decisions in taking or not taking
action under this Agreement; (e) such assignee represents and warrants that it
is an Eligible Assignee; (f) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably incidental
thereto; (g) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Agreement are required to
be performed by it as a Bank; and (h) such assignee represents and warrants that
it is legally authorized to enter into such Assignment and Assumption.
ss15.3.Register. The Agent shall maintain a copy of each Assignment and
Assumption delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentages of, and principal amount of the Revolving Credit Loans owing to, the
Banks from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the Banks may treat
each Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower and the Banks at any reasonable time and from time to time upon
reasonable prior notice. Upon each such recordation, the assigning Bank agrees
to pay to the Agent a registration fee in the sum of $2,500.
ss15.4. New Revolving Credit Notes. Upon its receipt of an Assignment and
Assumption executed by the parties to such assignment, together with each
Revolving Credit Notes subject to such assignment, the Agent shall (a) record
the information contained therein in the Register, and (b) give prompt notice
thereof to the Borrower and the Banks (other than the assigning Bank). Within
five (5) Business Days after receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Agent, in exchange for each
surrendered Revolving Credit Notes, a new Revolving Credit Notes to the order of
such Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Assumption and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Revolving Credit
Notes to the order of the assigning Bank in an amount equal to the amount
retained by it hereunder. Such new Revolving Credit Notes shall provide that
they are replacements for the surrendered Revolving Credit Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Revolving Credit Notes, shall be dated the effective date of such
Assignment and Assumption and shall otherwise be in substantially the form of
the assigned Revolving Credit Notes. The surrendered Revolving Credit Notes
shall be canceled and returned to the Borrower.
ss15.5. Participants. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Agreement and the other Loan Documents; provided that (a)
the Borrower shall have approved such participant (such approval not to be
unreasonably withheld), (b) each such participation shall be in an amount of not
less than $8,000,000, (c) any such sale or participation shall not affect the
rights and duties of the selling Bank hereunder to the Borrower and the Agent
and the Bank shall continue to exercise all approvals, disapprovals and other
functions of a Bank, (d) the only rights granted to the participant pursuant to
such participation arrangements with respect to waivers, amendments or
modifications of, or approvals under, the Loan Documents shall be the rights to
approve waivers, amendments or modifications that would reduce the principal of
or the interest rate on any Revolving Credit Loans, extend the term or increase
the amount of the Commitment of such Bank as it relates to such participant,
reduce the amount of any fees to which such participant is entitled or extend
any regularly scheduled payment date for principal or interest, and (e) no
participant shall have the right to grant further participations or assign its
rights, obligations or interests under such participation to other Persons
without the prior written consent of the Agent.
ss15.6. Pledge by Lender. Notwithstanding any other provision of this
Agreement, any Bank at no cost to the Borrower may at any time pledge all or any
portion of its interest and rights under this Agreement (including all or any
portion of its Revolving Credit Notes) to any of the twelve Federal Reserve
Banks organized under ss.4 of the Federal Reserve Act, 12 U.S.C. ss.341. No such
pledge or the enforcement thereof shall release the pledgor Bank from its
obligations hereunder or under any of the other Loan Documents.
ss15.7. No Assignment by Borrower. The Borrower shall not assign or
transfer any of its rights or obligations under any of the Loan Documents
without prior Unanimous Bank Approval.
ss15.8. Disclosure. The Borrower agrees that, in addition to
disclosures made in accordance with standard banking practices, any Bank may,
after written notice to the Borrower, disclose information obtained by such Bank
pursuant to this Agreement to assignees or participants and potential assignees
or participants hereunder. Any such disclosed information shall be treated by
any assignee or participant with the same standard of confidentiality set forth
herein.
ss16. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise
expressly provided in this Agreement, any consent or approval required or
permitted by this Agreement may be given, and any term of this Agreement or of
any other of the other Loan Documents may be amended, and the performance or
observance by the Borrower or the Guarantor of any terms of this Agreement or
the other Loan Documents or the continuance of any default, 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 Banks.
Notwithstanding the foregoing, Unanimous Bank Approval shall be
required for any amendment, modification or waiver of this Agreement that:
(i)reduces or forgives any principal of any unpaid Revolving
Credit Loan or any interest thereon (including any interest
"breakage" costs) or any fees due any Bank hereunder, or
permits any prepayment not otherwise permitted hereunder; or
(ii) changes the unpaid principal amount of, or
the rate of interest on, any Revolving
Credit Loan; or
(iii) changes the date fixed for any payment of principal of or
interest on any Revolving Credit Loan (including, without
limitation, any extension of the Maturity Date) or any fees
payable hereunder; or
(iv) changes the amount of any Bank's Commitment (other than
pursuant to an assignment permitted under ss.15.1 hereof) or
increases the amount of the Total Commitment; or
(v) amends or otherwise changes the definition of
the Borrowing Base, or the method of
calculating such Borrowing Base; or
(vi) amends any of the covenants contained in ss.9 hereof; or
(vii) releases any Collateral beyond any release expressly
provided for in ss.5.3 hereof, or, except for utility
easements and the like approved by the Agent, subordinates any
lien granted to the Agent for the benefit of the Banks to any
lien for the benefit of any Person; or
(viii) releases or reduces the liability of the
Guarantor pursuant to the Guaranty; or
(ix) modifies any provision herein or in any other
Loan Document which by the terms thereof expressly
requires Unanimous Bank Approval; or
(x) amends any of the provisions governing funding
contained in ss.2 hereof; or
(xi) changes the rights, duties or obligations of the Agent
specified in ss.15 hereof (provided that no amendment or
modification to such ss.15 or to the fee payable to the Agent
under this Agreement may be made without the prior written
consent of the Agent); or
(xii) changes the definitions of Majority Banks or
Unanimous Bank Approval.
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 the Agent or the Banks or any Bank in exercising any
right shall operate as a waiver thereof or otherwise be prejudicial to such
right or any other rights of the Agent or the Banks. No notice to or demand upon
the Borrower shall entitle the Borrower to other or further notice or demand in
similar or other circumstances.
ss7. [Intentionally Omitted].
ss18. MISCELLANEOUS. The Borrower and the Guarantor jointly and severally
agree to indemnify and hold harmless the Agent and the Banks against all claims
and losses of every kind arising out of the Loan Documents, including without
limitation against those in respect of the application of Environmental Laws to
the Borrower. The Borrower and the Guarantor shall pay to the Agent and the
Banks promptly on demand all reasonable costs and expenses (including any taxes
and legal appraisal, engineering and other professional fees, syndication fees
and fees of its commercial finance examiner) incurred by the Agent and the Banks
in connection with the preparation, negotiation, execution, amendment,
syndication or enforcement of any of the Loan Documents. Any communication to be
made hereunder shall (a) be made in writing and by hand delivery or by
registered or certified first class mail, and (b) be made or delivered to the
address of the party receiving notice which is identified with its signature
below (unless such party has by five (5) days' written notice specified another
address), and shall be deemed made or delivered, when dispatched, left at that
address, or five (5) days after being mailed, postage prepaid, to such address.
This Agreement shall be binding upon and inure to the benefit of each party
hereto and its successors and assigns (but neither the Guarantor nor the
Borrower may assign its rights or obligations hereunder) and the Guarantor and
the Borrower agree to cooperate and execute and deliver any and all agreements,
documents and instruments reasonably required in connection with the terms
hereof, including, without limitation, any documents reasonably required by any
Bank in connection with the assignment by such Bank of any of its rights and
remedies hereunder. No failure or delay by the Agent and the Banks to exercise
any right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other right,
power or privilege. The provisions of this Agreement are severable and if any
one provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, such invalidity or unenforceability shall affect only such
provision in such jurisdiction. This Agreement, together with all Exhibits and
Schedules hereto, expresses the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement and any amendment hereby
may be executed in several counterparts, each of which shall be an original, and
all of which shall constitute one agreement. In proving this Agreement, it shall
not be necessary to produce more than one such counterpart executed by the party
to be charged. THIS AGREEMENT AND THE NOTE ARE CONTRACTS UNDER THE LAWS OF THE
STATE OF CONNECTICUT AND SHALL BE CONSTRUED IN ACCORDANCE THEREWITH AND GOVERNED
THEREBY. THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF ANY OF THE
LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF CONNECTICUT OR ANY
FEDERAL COURT SITTING THEREIN. The Borrower and the Guarantor, as an inducement
to the Agent and the Banks to enter into this Agreement, hereby waives all
rights to a jury trial with respect to any action arising in connection with any
Loan Document.
ss19. PREJUDGEMENT REMEDY WAIVER. THE BORROWER AND THE GUARANTOR
ACKNOWLEDGE THAT THE FINANCING EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION
WITHIN THE MEANING OF CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. THE
BORROWER AND THE GUARANTOR HEREBY WAIVE THEIR RIGHT TO NOTICE AND PRIOR COURT
HEARING OR COURT ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278a ET.
SEQ. AS AMENDED OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND
ALL PREJUDGMENT REMEDIES THE AGENT AND THE BANKS MAY EMPLOY TO ENFORCE THEIR
RIGHTS AND REMEDIES HEREUNDER. MORE SPECIFICALLY, THE BORROWER ACKNOWLEDGE THAT
THE BANK'S AND THE AGENT'S ATTORNEY MAY, PURSUANT TO CONN. GEN. STAT.
ss.52-278F, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT
ORDER. THE BORROWER ACKNOWLEDGE AND RESERVE THEIR RIGHT TO NOTICE AND A HEARING
SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY AS AFORESAID AND THE
AGENT AND THE BANKS ACKNOWLEDGE THE BORROWER'S AND THE GUARANTOR'S RIGHT TO SAID
HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as a sealed instrument as of the date first set forth above.
........ GROVE OPERATING, L.P.
........ By: Grove Property Trust
........ By: /s/ Joseph R. LaBrosse
........ ------------------------
Name: Joseph Labrosse
........ Title: Treasurer
........ Address: 598 Asylum Avenue
........ Hartford, Connecticut 06105
........ Telephone: (860) 520-4789
........ Telecopy: (860) 947-6960
........ GROVE PROPERTY TRUST
........ By: /s/ Joseph R. LaBrosse
-----------------------
........ Name: Joseph Labrosse
........ Title: Treasurer
........ Address: 598 Asylum Avenue
........ Hartford, Connecticut 06105
........ Telephone: (860) 520-4789
........ Telecopy: (860) 947-6960
<PAGE>
........ RHODE ISLAND HOSPITAL
........ TRUST NATIONAL BANK,
........ individually and as Agent
........ By: Keb H. Brockenbury
------------------------
........ Name:Keb H. Brockenbury
........ Title:First Vice-President
........ Address: One Hospital Trust Plaza
........ Providence, Rhode Island 02903
........ Telephone: (401) 278-7416
........ Telecopy: (401) 278-8006
........ By: /s/James St. Thomas
--------------------
........ Name: James St. Thomas
........ Title: First Vice President
........ Address: One Hospital Trust Plaza
........ Providence, Rhode Island 02903
........ Telephone: (401) 278-7416
........ Telecopy: (401) 278-8006
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,713,848
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,177,375
<PP&E> 91,508,029
<DEPRECIATION> 25,840,685
<TOTAL-ASSETS> 72,844,719
<CURRENT-LIABILITIES> 7,043,923
<BONDS> 29,149,658
0
0
<COMMON> 39,534
<OTHER-SE> 36,611,604
<TOTAL-LIABILITY-AND-EQUITY>72,844,719
<SALES> 0
<TOTAL-REVENUES> 1,306,168
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,002,867
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 173,121
<INCOME-PRETAX> 96,553
<INCOME-TAX> 0
<INCOME-CONTINUING> 96,553
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,553
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
