UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file No. 1-13080
GROVE PROPERTY TRUST
(Exact name of registrant as specified in its charter)
Maryland 06-1391084
(State or other jurisdiction of incorporation or organization) (I.R.S.
Employer Identification No.)
598 Asylum Avenue, Hartford, Connecticut 06105
(Address of Principal Executive Offices) (Zip Code)
(860) 246-1126
(Issuer's Telephone Number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class: Name of Each Exchange on Which Registered:
Common Shares of Beneficial Interest, American Stock Exchange
$.01 par value
Securities registered pursuant to Section 12(g) of the Exchange Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
during the preceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes: X No:
The number of Common Shares of Beneficial Interest outstanding as of August
6, 1998 was 8,453,829.
<PAGE>
GROVE PROPERTY TRUST
Form 10-Q
Index
- ------------------------------------------------------------------------------
Page
Part I: Financial Information
Item 1: Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets of as of June 30, 1998 and
December 31, 1997 3
Consolidated Statements of Income for the three months
ended June 30, 1998 and 1997 4
Consolidated Statements of Income for the six months
ended June 30, 1998 and 1997 5
Consolidated Statements of Cash Flows for the six months ended
June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
Item 3: Quantitative and Qualitative Disclosure About Market Risk 17
Part II: Other Information 17
Item 2: Change in Securities and Use of Proceeds
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K 19
Signatures 21
Exhibit Index 22
<PAGE>
GROVE PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
June 30, 1998 December 31, 1997
(Unaudited) (Audited)
(In thousands)
ASSETS
Real estate assets:
Land $ 27,006 $ 21,403
Buildings and improvements 158,721 125,412
Furniture, fixtures and equipment 1,422 952
--------------- --------------
187,149 147,767
Less accumulated depreciation (6,083) (3,674)
--------------- --------------
Net real estate assets 181,066 144,093
Cash and cash equivalents 3,630 1,466
Due from affiliates 670 620
Deferred charges, net of accumulated
amortizationof $33 and $127, respectively 857 849
Other assets 1,719 1,122
-------------- --------------
Total assets $ 187,942 $148,150
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 87,557 $ 33,457
Revolving credit facility 3,250 15,601
Other liabilities 1,905 1,387
Distributions payable 1,918 1,436
Security deposits 2,347 2,026
Due to affiliates 198 49
--------------- --------------
Total liabilities 97,175 53,956
Minority interests in consolidated 1,076 1,357
partnerships
Minority interest in Operating 22,525 24,339
Partnership
Shareholders' equity:
Preferred shares, $.01 par value
per share,
1,000,000 shares authorized; no
shares
issued or outstanding
Common shares, $.01 par value per
share,
34,000,000 shares authorized;
8,453,829 shares issued and 84 84
outstanding
Additional paid-in capital 68,855 68,976
Distributions in excess of earnings (1,773) (562)
------------ ---------------
Total shareholders'
equity 67,166 68,498
-------------- --------------
Total liabilities and shareholders' $ 187,942 $ 148,150
equity
=============== ==============
See notes to consolidated financial
statements.
-3-
<PAGE>
GROVE PROPERTY TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended
June 30,
1998 1997
(In thousands, except per
share data)
Revenues:
Rental income $ 8,438 $ 4,261
Property management - affiliates 139 173
Other income 43 26
Interest income 32 18
------------- ------------
Total revenues 8,652 4,478
------------- ------------
Expenses:
Property operating and maintenance 2,893 1,408
Real estate taxes 837 426
Interest expense 1,388 604
General and administrative 444 278
Depreciation and amortization 1,300 915
------------- ------------
Total expenses 6,862 3,631
------------- ------------
Income before minority interests and 1,790 847
extraordinary expenses
Minority interests in consolidated 22 46
partnerships
Minority interest in operating 456 291
partnership
------------- ------------
Income before extraordinary expenses 1,312 510
Extraordinary expenses related to debt
refinancing, net of minority interests 838 -
------------- ------------
------------- ------------
Net income $ 474 $ 510
============= ============
============= ============
Income before extraordinary expenses per $ 0.16 $ 0.13
share - basic
Extraordinary expenses per share - basic (0.10) -
============= ============
Net income per share - basic $ 0.06 $ 0.13
============= ============
Income before extraordinary expenses per $ 0.16 $ 0.13
share - assuming dilution
Extraordinary expenses per share - assuming (0.10) -
dilution
------------- ------------
Net income per share - assuming dilution $ 0.06 $ 0.13
============= ============
Weighted average number of common shares 8,454 3,954
outstanding-basic
Effect of warrants and stock options 8 35
============= ============
Weighted average number of shares 8,462 3,989
outstanding-assuming dilution
============= ============
See notes to consolidated financial statements.
-4-
<PAGE>
GROVE PROPERTY TRUST
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
For the Six Months Ended
June 30,
1998
1997
(In thousands, except per share data)
Revenues:
Rental income $15,879 $5,438
Property management-affiliates 233 218
Other income 81 86
Interest income 47 42
------------ ----------
Total revenues 16,240 5,784
------------ ----------
Expenses:
Property operating and maintenance 5,540 1,964
Real estate taxes 1,616 542
Related party management fees - 22
Interest expense 2,390 777
General and administrative 799 347
Depreciation and amortization 2,479 1,155
------------ ----------
Total expenses 12,824 4,807
------------ ----------
Income before minority interests and
extraordinary expenses 3,416 977
Minority interests in consolidated 39 49
partnerships
Minority interest in operating 878 314
partnership
------------ ----------
Income before extraordinary expenses 2,499 614
Extraordinary expenses related to debt
refinancing, net of minority 838 -
interests
------------ ----------
------------ ----------
Net income $1,661 $ 614
============ ==========
============ ==========
Income before extraordinary expenses per $ 0.30 $ 0.24
share-basic
Extraordinary expenses per share - basic (0.10) -
------------ ----------
Net income per share - basic $ 0.20 $ 0.24
============ ==========
Income before extraordinary expenses per share $ 0.30 $ 0.24
- - assuming dilution
Extraordinary expenses per share - assuming (0.10) -
dilution
------------ ----------
Net income per share - assuming dilution $ 0.20 $ 0.24
============ ==========
Weighted average number of common shares 8,454 2,627
outstanding - basic
Effect of warrants and stock options 18 -
============ ==========
Weighted average number of shares outstanding - 8,472 2,627
assuming dilution
============ ==========
See notes to consolidated financial statements.
-5-
<PAGE>
GROVE PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June
30,
1998 1997
(In thousands)
Operating Activities:
Net income $ 1,661 $ 614
Adjustments to reconcile net income to net
cash provided
by operating activities
Depreciation and amortization 2,479 1,155
Extraordinary expenses related to debt 838 -
refinancing
Minority interests 917 363
Non-cash compensation expense 60 60
Change in other assets (577) (71)
Change in accounts payable, accrued expenses
and other liabilities 748 (1,495)
------------ ---------------
Net cash provided by operating activities 6,126 626
------------ ---------------
Investing activities:
Purchase of OP Units and partnership (2,336) (3,383)
interests
Deferred charges (42) -
Cash acquired on purchase of partnership 62 3,213
interests
Additions to real estate assets (29,553) (841)
------------ ---------------
Net cash used in investing activities (31,869) (1,011)
------------ ---------------
Financing activities:
Net proceeds from mortgage notes payable 63,000 15,084
Net (repayments) proceeds from revolving (12,350) 1,825
credit facility
Proceeds from sale of common stock - 30,000
Equity offering costs (30) (2,458)
Repayment of mortgage notes payable (18,113) (41,044)
Borrowings from (loans to) affiliates, net 59 (758)
Financing costs (562) (648)
Prepayment penalty on debt refinancing (668) -
Dividends and distributions paid (3,429) (217)
------------ ---------------
Net cash provided by financing activities 27,907 1,766
------------ ---------------
Net change in cash and cash equivalents 2,164 1,381
Cash and cash equivalents, beginning of period 1,466 381
------------ ---------------
Cash and cash equivalents, end of period $ 3,630 $ 1,762
============ ===============
Supplemental Information:
Cash paid for interest $ 2,099 $ 626
Mortgage notes payable assumed through $ 9,213 $ 64,306
property acquisitions
Net rental properties contributed in $ 61 $ 16,051
exchange for OP Units
Excess of liabilities over assets assumed
on acquisition of
partnership interests $ 80 $ 1,417
See notes to consolidated financial statements.
-6-
<PAGE>
GROVE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
1. FORMATION AND DESCRIPTION OF THE COMPANY
Grove Property 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 forty-one residential communities and four
retail properties. The residential communities are generally mid-priced
multi-family communities that are located in the southern New England
area.
2. ACQUISITIONS, CONSOLIDATION TRANSACTIONS, AND EQUITY OFFFERINGS
On March 14, 1997, the Company completed a series of transactions (the
"Consolidation Transactions") that included the following:
The Company formed an operating partnership (the "Operating
Partnership" or the "OP") to serve as the vehicle for the consolidation
of ownership and control of the Company's operations and assets.
Pursuant to an exchange offer, the Operating Partnership purchased
from non-affiliated limited partners substantially all of the
outstanding partnership interests of twenty properties, including one
retail property ("Property Partnerships") in exchange for 1,205,324
partnership units (the "Common Units" or "OP Units") of the Operating
Partnership, or, in certain circumstances, cash. Common Units are
generally exchangeable for the Company's Common Shares on a one-for-one
basis.
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 additional Common Shares to the holders of the issued
and outstanding Common Shares just prior to the Consolidation
Transactions. All amounts based on outstanding Common Shares have been
retroactively adjusted to reflect the Stock Split.
The Company issued 3,333,333 Common Shares to new equity investors
(the "New Equity Investment") in exchange for $30.0 million
(approximately $27.5 million after costs of issuance).
Pursuant to a contribution agreement among the Company, certain
companies and individuals affiliated with the Company (the "Grove
Companies") and the Operating Partnership, such companies and
individuals contributed substantially all of the assets and operations
of the management services division of Grove Property Services Limited
Partnership and the Grove Companies' interests in the Property
Partnerships were also transferred to the Operating Partnership.
In exchange for the above, the Grove Companies received an aggregate of
909,115 Common Units in the Operating Partnership and a cash payment of
$178,000 from the Company, and the Company received 620,102 Common
Units in the Operating Partnership. Additionally, the Company
contributed to the Operating Partnership the net proceeds received from
the aforementioned new equity investment in exchange for 3,333,333
additional Common Units.
In connection with the Consolidation Transactions, the Operating
Partnership entered into a three-year secured revolving acquisition and
working capital credit facility of up to $25.0 million (the "Original
Revolving Credit Facility") and a $15.1 million ten-year term mortgage
loan (the "Mortgage Loan").
On June 1, 1997, the Company acquired two related party residential
apartment complexes ("Four Winds"and"Brooksyde"). In addition, the Company
acquired an interest in Windsor Arbor Limited Partnership, the owner of
River's Bend Apartment ("Windsor Arbor"). Upon consummation of the June 1,
1997 transactions, the Operating Partnership issued an aggregate of 420,183
Common Units valued at $10 per unit. The Company also assumed mortgage debt
on Four Winds and Brooksyde in the aggregate remaining principal amount of
$6.2 million.
-7-
<PAGE>
To complete these transactions, the Company borrowed $1.8 million under
its Original Revolving Credit Facility.
On July 2, 1997, the Company acquired certain condominium units representing
a portion of the condominium units in the Greenfield Village complex located
in Rocky Hill, Connecticut from an unrelated party. The Company paid
approximately $4.3 million, in the aggregate, with proceeds from the Original
Revolving Credit Facility, for these units.
On September 1, 1997, the Company acquired two apartment communities from
related parties. Glastonbury Center Apartments in Glastonbury, Connecticut
and Summit and Birch Hill Apartments in Farmington, Connecticut. The
Operating Partnership issued 325,836 Common Units valued at 10.50 per unit,
assumed $9.8 million in debt and drew down $750,000 against its Original
Revolving Credit Facility to acquire these properties.
On September 30, 1997, the Company acquired the remaining limited
partnership interests in Windsor Arbor for $4.9 million, with proceeds from
the Original Revolving Credit Facility.
On October 31, 1997, the Company purchased an apartment community from an
unrelated party in Ellington, Connecticut (High Meadow). The $4.2 million
purchase price was paid utilizing borrowings under the Original Revolving
Credit Facility.
In addition, on October 31, 1997, the Company acquired two retail properties
from related parties. These acquisitions, Cornerblock and the Wharf Building,
are specialty retail properties located in Edgartown, Massachusetts. Upon
consummation of the Cornerblock and Wharf Building transactions, the
Operating Partnership issued an aggregate of 143,334 Common Units valued at
$10.50 each. To complete these transactions, the Company borrowed
approximately $7.0 million under its Original Revolving Credit Facility.
In November 1997, the Company completed the sale of 4,500,000 Common Shares
(the "November Offering"). The net proceeds from the sale after underwriting
discounts and other costs was approximately $45.2 million. The Company used
the proceeds to pay off its Original Revolving Credit Facility and certain
mortgage notes payable (see notes 5 and 6) and for working capital purposes.
On December 1, 1997, the Company acquired an apartment community from an
unrelated party in Ellington, Connecticut ("Pinney Brook") for approximately
$950,000. The purchase price was paid from working capital.
On December 31, 1997, the Company acquired four communities from unrelated
parties for approximately $20.0 million. The individual communities are
Briar Knoll, Ribbon Mill, Hilltop and Spring Hill Commons and are located
respectively in Manchester, Vernon and Norwich, Connecticut and Acton,
Massachusetts. The purchase price was paid utilizing borrowings under the
Original Revolving Credit Facility and cash on hand.
On January 23, 1998, the Company purchased an apartment community, Tanglewood
Apartments, located in West Warwick, Rhode Island from an unrelated party.
The purchase price of approximately $7.0 million was paid utilizing
borrowings under the Original Revolving Credit Facility.
On April 1, 1998, the Company purchased a specialty retail property in
Freeport, Maine and an apartment community in Agawam, Massachusetts. The
retail property includes a 25,000 square foot complex and was purchased for
approximately $7.2 million. The apartment community includes 88 units and
was purchased from an affiliate of the Company for approximately $3.3
million. These acquisitions were financed through the assumption of a $3.9
first mortgage on the retail property, issuance of 5,818 common units, and
utilizing borrowings under the Original Revolving Credit Facility. In
addition, a mortgage of $2.9 million on the apartment community was assumed
and paid off at the closing.
On June 1, 1998, the Company acquired two residential properties in East
Providence, Rhode Island from an unrelated party. The purchase price of
$19.4 million was financed with the assumption of a $2.4 million loan and
$17.0 million from the new long-term mortgage financing described in Note 4.
On August 7, 1998, the Company acquired an apartment community located in
Sturbridge, Massachusetts for approximately $4.0 million. The purchase price
was financed with the assumption of a $2.4 million loan and $1.6 million from
the New Revolving Credit Facility described in Note 5.
The Company intends to continue to operate all of its multi-family
communities and retail commercial properties as rental properties.
-8-
<PAGE>
3. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements are presented on a consolidated basis. Included
in the Company's financial statements are the accounts of the Operating
Partnership and various property partnerships. Properties are owned
either directly by the Operating Partnership, or are owned by various
limited partnerships or limited liability companies, that in turn are
substantially (89% to 99%) or wholly owned by the Operating Partnership.
All significant intercompany transactions are eliminated in consolidation.
The accompanying interim financial statements have been prepared by the
Company's management in accordance with generally accepted accounting
principles for interim financial information and in conjunction with the
rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the interim financial statements presented herein
reflect all adjustments of a normal and recurring nature which are
necessary to fairly state the interim financial statements. The results
of operations for the interim period ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1998. These financial statements should be read in
conjunction with the Company's audited financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997. Certain amounts have been reclassified in the
1997 financial statements in order to conform with the 1998 financial
statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments from financial
institutions with an original maturity of three months or less at the time
of purchase to be cash equivalents. The combined account balances at each
financial institution periodically exceed the Federal Depository Insurance
Corporation ("FDIC") insurance coverages and, as a result, there is a
concentration of credit risk related to amounts on deposit in excess of
FDIC insurance coverage. The Company believes that the risk is not
significant since its cash is on deposit with major financial institutions.
Real Estate Asset Capitalization and Depreciation
Acquisitions are recorded in accordance with the purchase method of
accounting Expenditures for long-lived replacement-type items in
stabilized properties' such as appliances and floor coverings, are
capitalized. Furthermore, expenditures for non-recurring items under
$1,000 and for normal tenant turnover expenses (such as cleaning and
painting) and repairs and maintenance are expensed as incurred. With
respect to redevelopment properties, the Company generally capitalizes all
redevelopment related costs incurred throughout the redevelopment stage.
Depreciation is provided for building and land improvements and buildings
using the straight-line method over the estimated useful lives of the
assets (10 to 30 years). Additionally, furniture, fixtures and equipment
are depreciated using an accelerated method over the estimated useful
lives of the assets (5 to 7 years).
Long-Lived Assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of"
(FAS No. 121), requires long-lived assets to be reviewed for impairment
when events or circumstances indicate that an impairment might exist.
When an impairment indicator is present, assets must be grouped at the
lowest level for which there are identifiable cash flows. If the sum of
the undiscounted cash flows is less than the carrying amounts of the
assets, an impairment loss must be recorded. The impairment loss is
measured by comparing the fair value of the assets with their carrying
amount. To date, no losses have been recognized and management believes
that no impairment conditions exist.
-9-
<PAGE>
Per Share Data
In 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share ("Statement 128"). Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes the dilutive effects of options and warrants
(see Note 6). Earnings per share - assuming dilution is very similar to
fully diluted earnings per share. All earnings per share amounts for all
periods have been presented and restated to conform to Statement 128.
Income per common share information is based on the weighted average
number of Common Shares outstanding during each period. On February 10,
1997, the Board of Trust Managers of the Company declared a stock dividend
aggregating 26,250 Common Shares and the concurrent effectuation of a
1.125-for-one common stock split. All shares outstanding and per share
amounts have been restated to reflect these changes in capital structure.
Stock-Based Compensation
The Company has adopted Financial Accounting Standard No. 123, "Accounting
for Stock-Based Compensation." This statement defines a fair value based
method of accounting for employee stock compensation plans. However, it
also allows an entity to continue to measure compensation cost for those
plans in accordance with Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees." Under APB No. 25,
compensation cost is the excess, if any, of the quoted market price of the
stock at the grant date over the amount the employee must pay to acquire
the stock. The Company has elected to continue to account for its
employee stock compensation plans under APB No. 25.
Advertising
The Company expenses advertising costs as incurred. Advertising costs
were $133,216 and $44,014 for the three months ended June 30, 1998, and
1997, respectively, and $239,569 and $58,311 for the sixth months ended
June 30, 1998 and 1997, respectively.
Deferred Charges
Deferred charges, consisting principally of loan costs, are amortized on a
straight line basis over the term of the related obligation. When term
loans are retired prior to maturity, the unamortized deferred loan costs
are written-off and reported as an extraordinary expense item.
Revenue Recognition
Rental income attributable to leases is recorded when due from tenants and
recognized monthly as it is earned, which is not materially different than
the straight-line basis. The Company generally requires tenants to
provide a cash security deposit equal to one month's rent or pay the last
month's rent in advance. Such payments are deferred and are included in
security deposits on the accompanying consolidated balance sheets.
4. MORTGAGE NOTES PAYABLE
On June 1, 1998, the Company closed on a $63.0 million, ten year term loan
with a lender. The net proceeds of the loan were used to repay an
existing $15.0 million loan, acquire two properties in East Providence for
$17.0 million (see Note 2), pay down $27.0 million of the Original
Revolving Credit Facility (see note 5) and the remaining amount of
approximately $3.0 million was deposited in working capital reserves and
used for transaction costs. Payments of interest only are due under the
new $63.0 million loan at an effective fixed interest rate of 6.71% and
the loan matures in June 2008. With this new financing, the Company's
weighted average interest rate on its long-term debt is 6.9% and its
weighted average maturity is 9.3 years.
As a result of the $15.0 million loan repayment and retirement of the
Original Revolving Credit Facility, the Company incurred $0.2 and $0.3
million, respectively, of expenses related to the write-off of unamortized
finance costs. In addition, the Company incurred $0.7 million of expense
in connection with the breakage of certain LIBOR
swap contracts. Accordingly, the results of operations for the quarter
and six months ended June 30, 1998 reflect
approximately $0.8 million of extraordinary expenses (net of minority
interests).
-10-
<PAGE>
Mortgage notes payable consist of the following at June 30,1998 (in
thousands):
Amortizing first mortgage notes $ 20,557
Interest only first mortgage notes 67,000
----------
$ 87,557
==========
The amortizing first mortgage notes have fixed interest rates between
7.04% and 8.33%. These notes mature between the years 2000 and 2013 and
are collateralized by seven of the properties with a carrying amount of
approximately $28.5 million as of June 30, 1998. These notes are partially
guaranteed by certain executive officers and shareholders of the Company.
There are two interest only first mortgage notes. One note has a
principal balance of $4.0 million requiring monthly payments of interest
only at a fixed rate of 7.00%, and matures in 2007. This note is
collateralized by one property with a carrying amount of approximately
$6.4 million as of June 30, 1998. The other note has a principal balance
of $63.0 million requiring monthly payments of interest at an effective
fixed interest rate of 6.71%, and matures in 2008. This note is
collateralized by seventeen properties with an aggregate carrying amount
of approximately $74.5 million as of June 30, 1998.
Annual principal payments due as of June 30, 1998, are as follows (in
thousands):
Period Ending December 31,
1998 $ 194
1999 317
2000 343
2001 370
2002 400
Thereafter 85,933
=========
$ 87,557
=========
5. REVOLVING CREDIT FACILITY
Borrowings under the Original Revolving Credit Facility were
collateralized by thirteen properties and interest was payable monthly at
a floating rate of 1.2% above the 30, 60, or 90 day LIBOR rate.
In April 1998, the Operating Partnership entered into a new two year
Revolving Credit Facility with its bank (the "New Revolving Credit
Facility") and retired the Original Revolving Credit Facility. The New
Revolving Credit Facility increased the availability of the credit line to
$50.0 million from $25.0 million and converted the line to an unsecured
line from a secured line. The New Revolving Credit Facility bears
interest payable monthly at a floating rate of 1.2% above the 30, 60, or
90 day LIBOR rate. The New Revolving Credit Facility is available to fund
future property acquisitions and up to $5.0 million is available to fund
working capital needs. As of June 30, 1998, the New Revolving Credit
Facility had $3.25 million outstanding.
-11-
<PAGE>
6. SHAREHOLDERS' EQUITY
The following table outlines the 1997 and 1998 activity in the Operating
Partnership equity accounts:
Number of:
------------------------
Limited
Company's Partners
Operating Operating
Partnership Partnership
Units Units
-----------------
Outstanding at January 1, 1997 620,102 -
Consolidation Transactions in March 1997:
New Equity Investment 3,333,333 -
Transfer of property interests-Grove Companies - 909,115
Transfer of property interests-non-affiliates - 1,205,324
June 1997 acquisitions - 420,183
Proceeds from stock options in May 1997 394 -
September 1997 acquisitions - 325,836
October 1997 acquisitions - 143,334
The November Offering 4,500,000 -
April 1998 acquisitions - 5,818
OP Units Redeemed for cash April 1998 through -
June 1998 - (174,557)
------------------------
Outstanding at June 30, 1998 8,453,829 2,835,053
========================
Ownership Percentage 74.9% 25.1%
========================
Income is allocated to the Minority Interest in the Operating Partnership
based on its weighted average ownership percentage of the Operating
Partnership. The ownership percentage is computed by dividing the
weighted average number of OP Units held by the Limited Partners
("Minority Interest") holders by the total weighted average OP Units
outstanding. Issuance or redemption of additional Common Shares or OP
Units changes the ownership percentage of both the Minority Interest and
the Company.
An OP Unit and each Common Share have essentially the same economic
characteristics as they effectively share equally in the net income or
loss and distributions of the OP. OP Units generally may be redeemed for
cash or, at the election of the Company, for Common Shares on a
one-for-one basis, subject to certain lock-up provisions.
Common Shares have been reserved for future issuance as follows:
OP Units not owned by the Company (see above) 2,835,053
Underwriters warrants 47,248
Stock options issued 977,723
Additional stock options issuable 590,003
-----------
4,450,027
===========
At the Company's annual meeting on June 30, 1998, the Board of Directors
approved an increase in the member of authorized preferred and common
shares from 1,000 and 13,999,000 to 1,000,000 and 34,000,000, respectively.
-12-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
The results of operations for the three and six months ended June 30, 1997
included 24 and 27 residential communities, respectively, and one retail
property. The results of operations for the three and six months ended June
30, 1998 included 33 and 36 residential communities and three and four
retail properties, respectively. (See Note 2 to the consolidated financial
statements for details).
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this report.
Results of Operations
Results of operations of the Company for the six months ended June 30, 1998
and June 30, 1997.
Total revenues increased $10,456,000 from $5,784,000 to $16,240,000 during
the six months ended June 30, 1998, as compared to the corresponding period
in 1997. The increase is primarily due to the operations of the properties
acquired during the period from March 14, 1997 to June 30, 1998 ( the "
Recent Acquisitions ") (See Note 2 to the consolidated financial statements
for details).
Property operating and maintenance expenses increased $3,576,000 from $1,964,000
to $5,540,000 during the six months ended June 30, 1998, as compared to the
corresponding period in 1997. The increase is primarily due to the operations of
the Recent Acquisitions.
Real estate taxes increased $1,074,000 from $542,000 to $1,616,000 during the
six months ended June 30, 1998, as compared to the corresponding period in 1997.
The increase is due primarily to the Recent Acquisitions. Related party
management fees decreased from $22,000 to zero 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 in March 1997.
Interest expense increased $1,613,000 from $777,000 to $2,390,000 during
the six months ended June 30, 1998, as compared to the corresponding period
in 1997. The increase is primarily due to the assumption of mortgage debt
and new debt related to the Recent Acquisitions.
General and administrative expenses increased $452,000 from $347,000
to $799,000 during the six months ended June 30, 1998, as compared to
the corresponding period in 1997. This increase is primarily due to
the increased costs associated with the change in size and structure
of the Company.
Depreciation and amortization increased $1,324,000 from $1,155,000 to
$2,479,000 during the six months ended June 30, 1998, as compared to
the corresponding period in 1997. This increase is related to the
Recent Acquisitions.
The Company's income before extraordinary expenses increased
$1,885,000 from $614,000 to $2,499,000 during the six months ended
June 30, 1998, as compared to the corresponding period in 1997. The
increase in income before extraordinary expenses is primarily due to
the operations of the Recent Acquisitions.
In June 1998, the Company refinanced certain of its debt. In
connection with the refinancing, the Company wrote-off related
unamortized deferred financing costs and incurred prepayment penalties
and related costs. These costs were charged to operations and are
reflected as extraordinary expenses, net of minority interests.
Results of operations of the Company for the three months ended June
30, 1998 and 1997.
Total revenues increased $4,174,000 from $4,478,000 to $8,652,000
during the three months ended June 30, 1998, as compared to the
corresponding period in 1997. The increase is primarily due to the
operations of the Recent Acquisitions.
Property operating and maintenance expenses increased $1,485,000 from
$1,408,000 to $2,893,000 during the three months ended June 30, 1998,
as compared to the corresponding period in 1997. The increase is
primarily due to additional expenses related to of the Recent
Acquisitions.
-13-
<PAGE>
Real estate taxes increased $411,000 from $426,000 to $837,000 during the
three months ended June 30, 1998, as compared to the corresponding period in
1997. This increase is related to the Recent Acquisitions.
Interest expense increased $784,000 from $604,000 to $1,388,000 during the
three months ended June 30, 1998, as compared to the corresponding period in
1997. The increase is primarily due to the assumption of mortgage debt and new
debt related to the Recent Acquisitions.
General and administrative expenses increased $166,000 from $278,000 to
$444,000 during the three months ended June 30, 1998, as compared to the
corresponding period in 1997. This increase is primarily due to the increased
costs associated with the change in size and structure of the Company.
Depreciation and amortization increased $385,000 from $915,000 to
$1,300,000 during the three months ended June 30, 1998, as compared to the
corresponding period in 1997. The increase is primarily due to additional
depreciation related to the Recent Acquisitions.
The Company's income before extraordinary expenses increased $802,000 from
$510,000 to $1,312,000 during the three months ended June 30, 1998, as compared
to the corresponding period in 1997. The increase is primarily due to the
operations of the Recent Acquisitions.
Same Community Analysis
For the six months ended June 30, 1998 and June 30, 1997.
The 27 apartment communities (2,564 apartments) owned by Grove or its
affiliated predecessors since the beginning of 1996, a "Same Community"
comparison, experienced an increase in average monthly rental rates, offset by a
small decrease in average economic occupancy and experienced an increase in net
operating income. On a Same Community basis, the weighted average monthly rental
rate per apartment increased 3.8% to $725 from $698 and the economic occupancy
rate decreased to 95.5% from 96.5% for the first six months of 1998 as compared
to the first six months of 1997, respectively. Overall, Same Community net
operating income increased 8.1% to $6.3 million from $5.8 million for the first
six months of 1998 as compared to the first six months of 1997, respectively.
Net operating income increased due to a 2.6% increase in revenues and 4.1%
decrease in operating expenses. Revenues increased due to the increase in rental
rates partially offset by a decrease in occupancy. Expenses decreased primarily
due to a decrease in utility costs and snow plowing as a result of the unusually
mild weather experienced in the first quarter of 1998. The following table
summarizes Same Community operations:
------------------
Six Months Ended %
June 30,
------------------
1998 1997 Change
Economic Occupancy 95.5% 96.5% -1.0%
==================
Average monthly rental rate per $ 725 $ 698 3.8%
unit
==================
Revenues (millions) $10.72 $10.44 2.6%
Operating expenses (millions) 4.47 4.66 -4.1%
=========================
Net operating income $6.25 $5.78 8.1%
(millions)
=========================
For the three months ended June 30, 1998 and June 30, 1997.
The 27 apartment communities (2,564 apartments) owned by Grove or its
affiliated predecessors since the beginning of 1996, a "Same Community"
comparison, experienced an increase in average monthly rental rates, offset
by a small decrease in average economic occupancy and experienced an increase
in net operating income. On a Same Community basis, the weighted average
monthly rental rate per apartment increased 3.8% to $728 from $702 and the
economic occupancy rate decreased to 96.1% from 96.9% for the second
quarter of 1998 as compared to the second quarter of 1997, respectively.
Overall, Same Community net operating income increased 5.6% to $3.2 million
from $3.1 million for the second quarter of 1998 as compared to the second
quarter of 1997, respectively. Net operating income increased due to a 2.3%
increase in revenues and 2.2% decrease in operating expenses. Revenues
increased due to the increase in rental rates partially offset by a decrease
in occupancy. Expenses decreased primarily due to decreases in payroll,
insurance and snow removal. The following table summarizes Same Community
operations:
-14-
<PAGE>
------------------
Quarter Ended %
June 30,
------------------
1998 1997 Change
Economic Occupancy 96.1% 96.9% -0.8%
==================
Average monthly rental rate per $ 728 $ 702 3.8%
unit
==================
Revenues (millions) $5.43 $5.31 2.3%
Operating expenses (millions) 2.20 2.25 -2.2%
=========================
Net operating income $3.23 $3.06 5.6%
(millions)
=========================
Liquidity and Capital Resources
Cash and cash equivalents totaled $3,630,000 as of June 30, 1998. The
Company's ratio of long-term debt, including the Revolving Credit Facility,
to total market capitalization on June 30, 1998 was 43.5% based on total
market capitalization of $208.6 million based on 11,288,882 Common Units and
Common Shares valued at per $10.44 share/unit (the closing price on June 30,
1998) plus $90.8 million of long-term debt, including the Revolving Credit
Facility.
Cash provided by operating activities was $6,126,000 for the six months ended
June 30, 1998. Cash used in investing activities was $31,869,000 for the six
months ended June 30, 1998. Net cash provided by financing activities was
$27,907,000 for the six months ended June 30, 1998.
On June 15, 1998, the Company declared a dividend of $0.17 per share which
was paid on July 17, 1998. The dividends declared during the period resulted
in a 64.4% payout of funds from operations for the three months ended June
30, 1998.
On June 15, 1998, the Operating Partnership declared a distribution of $0.17
per Common Unit to the limited partners of the OP that was paid on July 17,
1998.
In March 1997, the Operating Partnership entered into a three year Revolving
Credit Facility guaranteed by the Company, for up to $25.0 million (the
"Original Revolving Credit Facility"). Borrowings under the Original
Revolving Credit Facility were collateralized by thirteen of the Properties
and interest was payable monthly at a floating rate of 1.2% above the 30, 60,
or 90 day LIBOR rate. The Original Revolving Credit Facility was available
to fund future property acquisitions, up to $4.0 million was available to
fund working capital needs, and up to $2.0 million was available to fund the
redemption of Common Units or the purchase of Common Shares by the Operating
Partnership.
In April 1998, the Operating Partnership entered into a new two year
Revolving Credit Facility with its bank and retired the Original Revolving
Credit Facility. The new Revolving Credit Facility increased the
availability of the credit line to $50.0 million from $25.0 million and
converted the line to an unsecured line from a secured line. The new
Revolving Credit Facility bears interest payable monthly at a floating rate
of 1.2% above the 30, 60, or 90 day LIBOR rate. The new Revolving Credit
Facility is available to fund future property acquisitions and up to $5.0
million is available to fund working capital needs.
The Company intends to meet its short-term liquidity requirements through
cash flow provided by operations and borrowings under the Revolving Credit
Facility. 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 interests 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
interests in properties.
Year 2000
In the course of the Company's planned upgrade of its information systems,
to accommodate growth of its business, the Company will assure that its
computer software and hardware will be year 2000 compliant. The Company
anticipates that the upgrade of its information systems will be completed
during 1998 and 1999 and believes that the cost thereof will not have a
material impact on net income, assets or liabilities. Because of the nature
of the Company's business, it does not depend to any material extent on
electronic interchange of data or information with its residents, suppliers
or vendors.
-15-
<PAGE>
Acquisitions/Dispositions
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. FFO 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. The Company believes that in
order to facilitate a clear understanding of its operating results, FFO
should be examined in conjunction with the net income as presented in the
financial statements and information included elsewhere in this Report. FFO
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. FFO 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 $1,485,000 from $1,523,000 to $3,008,000 for the three months
ended June 30, 1998 and 1997, respectively. Dividends declared for the three
months ended June 30, 1998 were $0.17 per share, representing 64.4% of FFO,
while dividends declared for the three months ended June 30, 1997 were $0.19
per share representing 77.5% of FFO. The dividends declaration for the three
months ended June 30, 1997 were for the long period from March 14, 1997, the
date the Consolidation Transactions closed, to June 30, 1997.
FFO was calculated as follows (in thousands):
For the Three Months For the Six Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
------------------------------------------
Income before minority interests
and extraordinary items $1,790 $847 $3,416 $ 977
Real estate depreciation and 1,252 774 2,390 980
amortization
Non-recurring expenses - - - 69
---------------------- ---------------------
Funds from operations before 3,042 1,621 5,806 2,026
minority interests
Minority interests in 34 98 63 106
consolidated partnerships
===================== =====================
FFO $3,008 $1,523 $5,743 $1,920
===================== =====================
Seasonality
Historically, net income from the Properties has been lower in the first and
second quarters than in the remainder of the year due to higher utility
charges, snow removal and other weather related expenses. In addition,
rental rates increase ratably during the year which results in higher rental
revenues in the second half of the year.
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.
-16-
<PAGE>
"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 ofcommercial 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 from 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 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
expense trends cannot be reliably predicted. These trends
may cause the Company to adjust its operations 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.
Item 3 Quantitative and Qualitative Disclosure About Market Risk
Based on Securities Exchange Act Release No. 38223, the Company is not
required to provide information in response to this item.
Part II. Other Information
Item 2. Changes in Securities and use of Proceeds
(a) At the Company's Annual Meeting of Shareholders held on June 30,
1998, the Company's shareholders approved amendments to the Company's Third
Amended and Restated Declaration of Trust dated March 14, 1997, as amended by
Articles Supplementary dated October 23, 1997 (as so amended, the "Charter")
(i) to reduce the maximum of Trust Managers which may serve on the Board
from 15 to 11, (ii) to increase the total number of Common Shares and
Preferred Shares which the Company has authority to issue to 34,000,000 and
1,000,000, respectively, and (iii) to provide that future amendments to the
Charter requiring shareholders approval may be approved by the holders of a
majority of the Company's outstanding shares entitled to vote.
(b) Not applicable.
(c) In June 1998, the Company, through Grove Operating, L.P, (the
"Operating Partnership"), issued 5,818 Common Units of the Operating
Partnership ("OP Units") valued at $10.50 per OP Unit in exchange for
partnership interests in a property owned by an affiliate of the Company.
The total value of the OP Units at the time of issuance in the transaction
was approximately $61,000.
The issuance of the OP Units referred to in the preceding paragraph was
not registered under the Securities Act of 1993 in reliance on the exemption
contained in Rule 506 thereunder on basis that each of the purchasers is in
such transaction was an accredited investor.
(d) Not applicable.
-17-
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of shareholders on June 30, 1998 (the
"Annual Meeting"). At the Annual Meeting, the shareholders of the Company:
1. Elected all of the nominees for the Trustee
2. Approved the amendment of the Charter to reduce the maximum
number of Trust Managers which may serve on the Board from 15 to
11;
3. Approved the amendment of the Charter to increase the total
number of Common Shares and Preferred Shares which the Company
has authority to issue to 34,000,000 and 1,000,000, respectively;
4. Approved the amendment of the Charter to provide that future
amendments to the Charter requiring shareholder approval may be
approved by the holders of a majority of the Company's
outstanding shares entitled to votes;
5. Approved the amendment of the Company's 1996 Share Incentive
Plan (the "1996 Plan") to increase the number of Common Shares
available for issuance thereunder from 900,000 to 1,400,000 and
to permit awards under the 1996 Plan to be granted to consultants
and advisors to the Company; and
1. Ratified the selection of Ernst & Young LLP as the
Company's independent public accountants for the year ending
each as described in the Notice of Annual Meeting and Proxy
Statement distributed in connection with the Annual Meeting. The
results of the voting of the shareholders with respect to such
matters is set forth below.
1. Election of Trustees
Total Vote for Total Vote Withheld
Each Trustee For Fach Trustee
Edmund F. Navarro 8,050,481 8,487
James F. Twaddell 8,044,881 14,087
2. The amendment of Charter to reduce the maximum number of Trust Managers
which may serve on the Board from 15 to 11.
For 6,999,201
Against 11,025
Abstain 13,021
Broker Non-Vote 1,035,721
3. The amendment of the Charter to increase the total number of Common
Shares and Preferred Shares which the Company has authority to issue to
34,000,000 and 1,000,000, respectively.
For 5,757,229
Against 1,231,780
Abstain 15,512
Broker Non-Vote 1,054,447
-18-
<PAGE>
4. The amendment of the Charter to provide that future amendments to the
Charter requiring shareholder Approval may be approved by the holders of
a majority of the Company's outstanding shares entitled vote.
For 6,912,913
Against 81,713
Abstain 9,895
Broken Non-Vote 1,054,447
5. The amendment of 1996 Plan to increase the number of Common Shares
available for issuance thereunder from 900,000 to 1,400,000 and to
permit awards under the 1996 Plan to be granted to consultants and
advisors to the Company.
For 5,836,221
Against 1,146,197
Abstain 22,103
Broker Non-Vote 1,054,447
6. The ratification of the appointment of Ernst & Young LLP as the
Company's independent public accountants for the year ending December 31, 1998
For 8,044,345
Against 2,700
Abstain 11,923
As disclosed in the Company's Proxy Statement dated April 30, 1998 and
distributed in connection with the Company's 1998 Annual Meeting of
Shareholders, any shareholder desiring to present a proposal at the
Annual Meeting of Shareholders to be held in 1999 and wishing to have
that proposal included in the Proxy Statement for that meeting must
submit proposal in writing to the Secretary of the Company in time to
be received by January 4, 1999.
The Company's By-laws also provide that any shareholder who intends to
present a proposal at any annual meeting of shareholders must give
advance notice of such proposal. In general, the advance notice must
be given to the Secretary of the Company on which the preceding year's
annual meeting was held. Proxies to be solicited by the Board of
Directors of the Company for the Annual Meeting of Shareholders to be
held in 1999 will confer discretionary authority to vote on any
shareholder proposal unless either (1) the Corporation receives notice
of such proposal no later than May 1, 1999 or (2) such proposal is
included in the Board of Directors' proxy material for that meeting as
described in the preceding paragraph.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
3. Third Amended and Restated Declaration of Trust of Grove Property Trust
dated March 14, 1997, as amended by Article Supplementary dated October 23,
1997 and by Articles of Amendment dated June 30, 1998.
4.1 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 the Agreement with Rhode Island Hospital Trust
National Bank, As Agent BancBoston Securities, Inc. As . Arranger Dated
April 30, 1998
-19-
<PAGE>
10. 1996 Share Incentive Plan of Grove Property Trust, Grove Operating, L.P.
and Property Partnerships, as amended to March 11, 1998 (incorporated by
reference to Appendix A to the Company's Notice of Annual Meeting and Proxy
Statement dated April 30, 1998 (Commission File No. 1-13080)).
27. Financial Data Schedule.
(B) Reports on Form 8-K
During the quarter ended June 30, 1998, the Company filed a Current
Report on Form 8-K dated June 1, 1998 responding to Items 2, 5 and 7.
(a) Financial statements of business acquired.
Freeport Properties
Financial Statements
Report of Independent Auditors
Combined Statements of Revenues and Certain Expenses for the Three Months
Ended March 31, 1998 (Unaudited) and for the Year Ended December 31, 1997
Notes to the Combined Statements of Revenues and Certain Expenses
Coachlight Village
Financial Statements
Report of Independent Auditors
Statements of Revenues and Certain Expenses for the Three Months Ended March
31, 1998 (Unaudited) and for the Years Ended December 31, 1997, 1996 and
1995
Notes to the Statements of Revenues and Certain Expenses
Village Park and Winchester Wood
Financial Statements:
Report of Independent Auditors
Combined Statements of Revenues and Certain Expenses for the Three Months
Ended March 31, 1998 (Unaudited) and for the Year Ended December 31, 1997
Notes to the Combined Statements of Revenues and Certain Expenses
Pro Forma Financial Statements (Unaudited)
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1998. Pro
Forma Condensed Consolidated Statements of Income for the Three Months Ended
March 31, 1998 and for the Year Ended December 31, 1997.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GROVE PROPERTY TRUST
Date: August 11, 1998 /s/Joseph R. LaBrosse
Name: Joseph R. LaBrosse
(on behalf of the registrant and as Chief
Financial Officer)
-21-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
3. Third Amended and Restated Declaration of Trust of Grove Property Trust
dated March 14, 1997, as amended by Article Supplementary dated October 23,
1997 and by Articles of Amendment dated June 30, 1998.
4.1 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 the Agreement with Rhode Island Hospital Trust
National Bank, As Agent BancBoston Securities, Inc. As Arranger Dated April
30, 1998.
10. 1996 Share Incentive Plan of Grove Property Trust, Grove Operating, L.P.
and Property Partnerships, as amended to March 11, 1998 (incorporated by
reference to Appendix A to the Company's Notice of Annual Meeting and Proxy
Statement dated April 30, 1998 (Commission File No. 1-13080)).
27. Financial Date Schedule.
-22-
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 exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within
-1-
<PAGE>
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 any crime involving moral
turpitude. Upon the incapacity, death, resignation or removal of any Trust
-2-
<PAGE>
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").
-3-
<PAGE>
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.
-4-
<PAGE>
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
-5-
<PAGE>
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.
-6-
<PAGE>
"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 March 14, 1997, 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.
-7-
<PAGE>
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.
-8-
<PAGE>
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
-9-
<PAGE>
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
-10-
<PAGE>
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
-11-
<PAGE>
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
-12-
<PAGE>
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
-13-
<PAGE>
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.
-14-
<PAGE>
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
-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.
-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.
-17-
<PAGE>
IN WITNESS WHEREOF, this Third Amended and Restated Declaration of
Trust has been signed on this 14 day of March, 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.
/s/ HAROLD GORMAN /s/ DAMON D. NAVARRO /s/ JAMES F. TWADELL
- ---------------------- -------------------------- -----------------------
Harold Gorman Damon D. Navarro James F. Twaddell
/s/ J. JOSEPH GARRAHY /s/ JOSEPH R. LaBROSSE
- ---------------------- --------------------------
J. Joseph Garrahy Joseph R. LaBrosse
-18-
GROVE PROPERTY TRUST
Articles Supplementary
GROVE PROPERTY TRUST, a Maryland real estate investment trust (the
"Trust"), hereby certifies to the Maryland State Department of Assessments and
Taxation that:
FIRST: Pursuant to authority expressly vested in the Board of Trustees
of the Trust by the Third Amended and Restated Declaration of Trust (the
"Declaration of Trust"), the Board of Trustees has duly reclassified 3,999,000
Preferred Shares (par value $0.01 per share) of the Trust as 3,999,000 Common
Shares (par value $0.01 per share) of the Trust and has provided for the
issuance of such shares.
SECOND: The reclassification increases the number of shares classified
as Common Shares from 10,000,000 shares immediately prior to the
reclassification to 13,999,000 shares immediately after the reclassification.
The reclassification decreases the number of shares classified as Preferred
Shares from 4,000,000 shares immediately prior to the reclassification to 1,000
shares immediately after the reclassification.
THIRD: The description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of the Common Shares and Preferred Shares contained in
the Declaration of Trust is not altered by these Articles Supplementary.
IN WITNESS WHEREOF, GROVE PROPERTY TRUST has caused these presents to
be signed in its name on its behalf by its President and witnessed by its
Secretary on October 23, 1997,
WITNESS: GROVE PROPERTY TRUST
/s/ Joseph R. LaBrosse By: /s/ Damon D. Navarro
- ----------------------------- ---------------------------------
Joseph R. LaBrosse Damon D. Navarro
Secretary President
<PAGE>
2
THE UNDERSIGNED, President of GROVE PROPERTY TRUST, who executed on
behalf of the Trust the Articles Supplementary of which this certificate is made
a part, hereby acknowledges in the name and on behalf of said Trust the
foregoing Articles Supplementary to be the corporate act of said Trust and
hereby certifies that the matters and facts set forth herein with respect to the
authorization and approval thereof are true in all material respects under the
penalties of perjury.
/s/ Damon D. Navarro
----------------------------
Damon D. Navarro
<PAGE>
Articles of Amendment of
GROVE PROPERTY TRUST
Declaration of Trust
Grove Property Trust, a Maryland real estate investment trust (the
"Company"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that, pursuant to the authority expressly vested in
the Board of Trust Managers of the Company by the Third Amended and
Restated Declaration of Trust dated March 14, 1997, as amended by Articles
Supplementary dated October 23, 1997 (as so amended, the "Charter"), the
Charter is hereby further amended as follows:
FIRST: SECTION 2.1 in Article II is deleted in its entirety and
replaced with the following:
SECTION 2.1 Number. 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 11. 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.
SECOND: SECTION 5.1 in Article V is deleted in its entirety and
replaced with the following:
SECTION 5.1. Authorized Shares. The total
number of Shares which the Trust has authority to
issue is 35,000,000 shares, of which 34,000,000 are
Common Shares, $.01 par value per share (each, a
"Common Share" or collectively, "Common Shares") and
1,000,000 are Preferred Shares, $.01 par value per
share (each a "Preferred Share" or, collectively,
"Preferred Shares").
THIRD: SECTION 9.1 in Article IX is deleted in its entirety and
replaced with the following:
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 a majority of all the
Shares then outstanding and entitled to vote on the
matter.
FOURTH: This Amendment of the Charter has been approved by the
Trust Managers of the Company and by the shareholders of the Company
holding more than two-thirds of the shares outstanding and entitled to
vote at the Annual Meeting held on June 30, 1998.
FIFTH: This Amendment of the Charter increases the authorized
capital of the Company as follows:
Prior to the Amendment, the total number of
authorized shares was 14,000,000 shares (13,999,000
Common Shares, $.01 par value per share and 1,000
Preferred Shares, $.01 par value per share) with
aggregate par value of $140,000.
Upon acceptance for record of this Amendment,
the total number of authorized shares will be
35,000,000 shares (34,000,000 Common Shares, $.01 par
value per share and 1,000,000 Preferred Shares, $.01
par value per share) with an aggregate par value of
$350,000.
<PAGE>
The undersigned, President of Grove Property Trust, who executed on
behalf of the Company these Articles of Amendment, hereby acknowledges in
the name and on behalf of the Company the foregoing Articles of Amendment
to be the act of the Company and hereby certifies that the matters and
facts set forth herein with respect to the authorization and approval
hereof are true in all material respects and that this statement is made
under the penalties for perjury.
IN WITNESS WHEREOF, Grove Property Trust has caused these Articles
of Amendment to be signed in its name and on its behalf by its President
and witnessed by its Secretary on June 30, 1998.
/s/ DAMON NAVARRO
Damon Navarro
President
/s/ JOSEPH R. LaBROSSE
Joseph R. LaBrosse
Secretary
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
with
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK,
AS AGENT
BANCBOSTON SECURITIES, INC.
AS ARRANGER
Dated April 30, 1998
<PAGE>
Table of Contents
1..DEFINITIONSAND RULES OF INTERPRETATION............ ....1
1.1.Definitions................................ ....1
1.2.Rules of Interpretation.................... ....1
2..THE REVOLVING CREDIT FACILITY.................... ....1
2.1. Commitment to Lend.............................1
2.2. The Revolving Credit Notes.....................2
2.3. Interest on Revolving Credit Loans; Fees.......2
2.4. Requests for Revolving Credit Loans............4
2.5. Conversion Options.............................7
2.6. Funds for Revolving Credit Loans...............8
3..REPAYMENT OF THE REVOLVING CREDIT LOANS................9
3.1. Maturity.......................................9
3.2. Optional Repayments of Revolving Credit Loans..10
4..CERTAIN GENERAL PROVISIONS.............................10
4.1. Funds for Payments.............................10
4.2. Computations...................................11
4.3. Inability to Determine LIBOR Rate..............12
4.4. Illegality.....................................12
4.5. Additional Costs, Etc..........................13
4.6. Capital Adequacy...............................14
4.7. Certificate....................................14
4.8. Indemnity......................................15
4.9. Interest on Overdue Amounts....................15
5..BORROWING BASE.........................................15
5.1. Additions and Replacements to Eligible Properties. 15
5.2. Removal from Eligible Properties...............16
5.3. Recourse Obligations...........................17
6..REPRESENTATIONSAND WARRANTIES..........................17
7..AFFIRMATIVE COVENANTS..................................19
8. NEGATIVE COVENANTS.....................................22
9..FINANCIAL COVENANTS....................................25
10.CONDITIONS TO THE CLOSING DATE.........................27
10.1. Loan Documents................................27
10.2. Certified Copies of Organization Documents....27
10.3. By-Laws; Resolutions..........................27
10.4. Incumbency Certificate; Authorized Signers....27
10.5. Survey and Taxes..............................28
10.6. Title Insurance; Title Exception Documents....28
10.7. Leases, Service Contracts and Other Documents.28
10.8. Estoppel Agreements...........................28
10.9. Certificates of Insurance.....................28
10.10. Hazardous Substance Assessments..............29
<PAGE>
10.11.Opinion of Counsel Concerning Organization and Loan
Documents............................................29
10.12. Structural Condition Assurances..............29
10.13. Permit Assurances; Compliance................29
10.14. Guaranty.....................................29
10.15. Financial Analysis of Initial Eligible Properties. 29
10.16. Inspection of Eligible Properties............30
10.17. Certifications from Government Officials; UCC-11
Reports.30
10.18. Proceedings and Documents....................30
10.19. Fees.........................................30
10.20.Closing Certificate..........................30
11.CONDITIONS TO ALL BORROWINGS............................30
11.1. Representations True; No Event of Default;
Compliance Certificate...............................30
11.2. No Legal Impediment...........................31
11.3. Governmental Regulation.......................31
12.EVENTS OF DEFAULT; ACCELERATION; ETC....................31
12.1. EVENTS OF DEFAULT; ACCELERATION...............31
12.2. Termination of Commitments....................33
12.3. Remedies......................................33
12.4. Distribution of Proceeds......................34
13.SETOFF..................................................34
14.ENVIRONMENTAL MATTERS...................................35
14.1.Representations and Warranties...................35
14.2.Environmental Indemnity and Covenants............37
15.THE AGENT...............................................39
15.1.Authorization.................................39
15.2.Employees and Agents..........................39
15.3.No Liability..................................39
15.4.No Representations............................40
15.5.Payments......................................40
15.6.Holders of Revolving Credit Notes.............42
15.7.Indemnity.....................................42
15.8.Agent as Bank.................................42
15.9.Notification of Defaults and Events of Default.42
15.10.Duties in the Case of Enforcement............42
15.11.Successor Agent..............................43
15.12.Notices......................................43
16.ASSIGNMENT; PARTICIPATIONS; ETC.........................44
16.1.Conditions to Assignment by Banks.............44
16.2.Certain Representations and Warranties; Limitations;
Covenants.............................................44
16.3.Register......................................45
16.4.New Revolving Credit Notes....................46
<PAGE>
16.5.Participations................................46
16.6.Pledge by Lender..............................46
16.7.No Assignment by Borrower.....................47
16.8.Disclosure....................................47
17.CONSENTS, AMENDMENTS, WAIVERS, ETC.....................47
18.MISCELLANEOUS.........................................48
19.WAIVER OF JURY TRIAL..................................50
20.PREJUDGMENT REMEDY WAIVER.............................50
<PAGE>
EXHIBITS
A Form of Revolving Credit Note
B Eligible Property Conditions
C Form of Lease Summaries
D Form of Loan Request
E Form of Compliance Certificate
F Form of Closing Certificate
G Form of Assignment and Assumption Agreement
<PAGE>
Schedules to Revolving Credit Agreement
SCHEDULE 1 Banks' Commitments
SCHEDULE 2 Definitions and Rules of Interpretation
SCHEDULE 3 List of Additional Guarantors and Eligible
Properties
SCHEDULE 6(b) Capitalization; Outstanding Securities, Etc.
SCHEDULE 6(c) Partially Owned Real Estate Holding Entities
SCHEDULE 6(p) Subsidiaries/Joint Ventures
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of the 30th day of April,
1998, 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 BankBoston Plaza, Providence, Rhode
Island 02903, and the other lending institutions which may become parties
hereto pursuant to 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").
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1.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.
1.2.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.
2. THE REVOLVING CREDIT FACILITY.
2.1.Commitment to Lend. Subject to the provisions of 2.4 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 2.4 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
<PAGE>
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 Total Commitment of the Banks shall be automatically reduced
pro rata in accordance with each Bank's Commitment Percentage to $35,000,000
on the anniversary of the Closing Date unless prior to such anniversary the
outstanding principal balance of the Revolving Credit Loans shall exceed
$35,000,000 at any one time.
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 2.4 hereof shall constitute a representation and warranty
by the Borrower that the conditions set forth in 10 have been satisfied as
of the Closing Date and that the conditions set forth in 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 10 have been satisfied as of the Closing Date and that the
conditions set forth in 11 have been met at the time of any request for a
Revolving Credit Loan.
2.2.The Revolving 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.
2.3.Interest on Revolving Credit Loans; Fees.
(a) Base Rate. 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
<PAGE>
earlier paid in accordance with 3.2) at a rate equal to the Base Rate.
(b) LIBOR Rate. 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 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) Interest Payments. The Borrower unconditionally promises to
pay interest on each Revolving Credit Loan in arrears on each Interest
Payment Date with respect thereto.
(d) Closing Fee. The Borrower agrees to pay to the Agent a
closing fee as set forth in that certain letter agreement dated March
27, 1998 between the Agent and the Borrower.
(e) Unused Fee. From and after the date hereof until the earlier
of (i) the Maturity Date or (ii) the date on which the Commitments
terminate, the Borrower agrees to pay to the Agent, for the accounts of
the Banks in accordance with their respective Commitment Percentages, an
unused fee in an amount equal to either (a) fifteen hundredths of one
percent (0.15%) per annum on the Daily Unused Commitment, for each day
that the aggregate outstanding principal balance of all Revolving Credit
Loans is more than fifty percent (50%) of the Total Commitment and (b)
eighteen hundredths of one percent (0.18%) per annum on the Daily Unused
Commitment, for each day that the aggregate outstanding principal
balance of all Revolving Credit Loans is equal to or less than fifty
percent (50%) of the Total Commitment, in each case calculated during
each calendar quarter or portion thereof for the first calendar quarter
of the term of this Agreement and the last calendar quarter of the term
of this Agreement, if either of same is not a full calendar quarter from
the date hereof to the Maturity Date (the "Unused Fee"). The Unused Fee
shall be payable quarterly in arrears on the fifteenth (15th) day of
each January, April, July and October quarter for the immediately
preceding calendar quarter commencing on the first such date following
the Closing Date, with a final payment on the earlier of (i) Maturity
Date or (ii) any earlier date on which the Commitments shall terminate.
<PAGE>
(f) Agent's Fee. The Borrowers shall pay to the Agent an Agent's
fee as set forth in that certain letter agreement dated March 27, 1998
between the Agent and the Borrower.
2.4. 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 if such Loan Request does not involve an
Acquisition Property or a New Eligible Property or (ii) $500,000 if such
Loan Request involves an Acquisition Property or a New Eligible
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 Eligible 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, a good faith estimate of
such loan request shall be provided at least fifteen (15)
Business Days prior to the proposed Drawdown Date, with a
Completed Loan Request to be provided at least five (5)
Business Days prior to the proposed Drawdown Date; and
<PAGE>
(iii)in the case of a loan request involving a proposed
New Eligible Property, a good faith estimate of such loan
request shall be provided at least thirty (30) days prior to
the proposed Drawdown Date, with a Completed Loan Request to
be provided at least five (5) Business 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 Eligible Property, a
completed writing in the form of Exhibit D 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 D"); and
(B)..in the case of a loan request involving a proposed
Acquisition Property, (x) a Completed Exhibit D, 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 7(e); and
(2) the proposed Acquisition Property does not have
unperformed or unpaid remediation costs that are not
budgeted and part of a remediation plan with costs
estimates approved by the Agent. 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
<PAGE>
liabilities to be made. Such environmental site assessments shall be
satisfactory to the Agent in all respects and shall be submitted to the
Agent at least ten (10) Business Days prior to the proposed Drawdown Date;
and
(C)..in the case of a loan request involving the addition of a proposed
New Eligible Property, (v) a Completed Exhibit D, (w) evidence that the
proposed New Eligible Property meets the Acquisition Conditions, (x) all of
the documents and other information relating to the proposed New Eligible
Property required by the Eligible Property Conditions, (y) evidence that
the proposed New Eligible Property does not have unperformed or unpaid
remediation costs that are not budgeted and part of a remediation plan with
costs estimates approved by the Agent. and (z) evidence that the proposed
New Eligible Property when aggregated with the other Eligible Properties
would not violate the covenants contained in 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 10 shall have been
satisfied as of the Closing Date and all of the conditions set
forth in 11 shall have been met, including, without
limitation, the condition under 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 E 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 9
on a pro forma basis after giving effect to
such requested Revolving Credit Loan,
<PAGE>
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 Eligible 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 Eligible Property, the Eligible Property
Conditions and the Acquisition Conditions have been met.
2.5. 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 2.5(b) and
2.5(a)(ii); (ii) subject to the further proviso at the end of this
2.5(a) and subject to 2.5(b) and 2.5(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 2.5(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
<PAGE>
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 2.5(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
2.5(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 2.4, elect to convert a Base Rate Loan to a LIBOR Loan
pursuant to 2.5(a) or elect to continue a LIBOR Rate Loan pursuant to
2.5(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.
2.6.Funds for Revolving Credit Loans.
(a) Subject to the other provisions of this 2, not later than
11:00 a.m. 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. 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
<PAGE>
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.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
3.1. 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
<PAGE>
date, and any and all other unpaid amounts due under this Agreement,
the Revolving Credit Notes or any other of the Loan Documents.
3.2. Optional Repayments of Revolving Credit Loans. 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
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., at
least five (5) Business Days prior written notice of any prepayment pursuant
to this 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 a minimum 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.
4. CERTAIN GENERAL PROVISIONS.
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
<PAGE>
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.
4.2.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
<PAGE>
Record from time to time shall constitute prima facie evidence of the
principal amount thereof.
4.3. 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.
4.4. 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 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.
<PAGE>
4.5. 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
<PAGE>
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.
4.6. 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.
4.7. Certificate. A certificate setting forth any additional
amounts payable pursuant to 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.
<PAGE>
4.8. 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.
4.9. 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.
5. BORROWING BASE.
5.1. Additions and Replacements to Eligible Properties.From time to time
during the term of the Revolving Credit Loans, due to the fact that
the Borrower may wish to enter into financial transactions involving
certain Eligible Properties, or for other reasons, the Borrower may
request in writing to the Banks to replace or add to the Eligible
Properties to be used in calculating the Borrowing Base. Any such
request for replacement or addition may be approved by the Agent,
which approval may be given or withheld by the Agent in its sole
discretion, as hereinafter provided. The Agent 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
<PAGE>
Eligible Properties to be used in calculating the Borrowing Base required by the
Eligible Property Conditions. Any property so approved by the Agent as a
replacement of or addition to the Eligible Properties (a "New Eligible
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 Eligible Property. Without in any way limiting the
absolute discretion of the Agent to approve or deny any request to include a
property as a New Eligible Property, before a property shall become a New
Eligible Property, the Borrower shall have, in any case, satisfied each of the
following conditions (the "Additional Eligible Property Conditions"):
(a) The Acquisition Conditions have been met with respect to the
Property (whether or not the proposed New Eligible Property is then
owned by the Borrower or an Additional Guarantor or is a proposed
Acquisition Property);
(b) The Borrower or an Additional Guarantor (as applicable) shall
satisfy, with respect to the proposed New Eligible Property, to the
satisfaction of the Agent (in its sole discretion), each of the Eligible
Property Conditions with respect to each New Eligible 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 Eligible 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 E to the Agent (with copies for each
Bank) to such effect;
(d) The New Eligible Property shall be 100% owned in fee simple by
the Borrower or an Additional Guarantor (as applicable) and the title
thereof shall be unencumbered by any mortgage, deed of trust, security
agreement or other lien (whether voluntary or involuntary); and
(e) The Agent shall, in its sole discretion, have approved in
writing the addition of the property as a New Eligible Property for
inclusion in the Borrowing Base.
5.2.Removal from Eligible Properties. From time to time during
the term of the Revolving Credit Loans, due to the fact that the Borrower may
wish to enter into financial transactions involving certain Eligible
Properties, or for other reasons, the Borrower may request in
<PAGE>
writing that the Banks allow the Borrower to remove an Eligible
Property from being used in calculating the Borrowing Base. The Agent shall
approve or deny such request in writing within thirty (30) days of receipt.
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 removal. The Agent shall approve the
removal so long as: (i) the Borrower demonstrates to the Agent that any
such removal shall in no way affect any of the Borrower's representations,
warranties, or covenants hereunder, including, but not limited to, the
Borrower's covenants regarding the Borrowing Base, and (ii) no Default or
Event of Default shall have occurred and be continuing hereunder.
5.3.Recourse Obligations. Notwithstanding the foregoing, 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.
6. REPRESENTATIONS 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 formed or 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, limited liability company 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
<PAGE>
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
Eligible Properties and other 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 December 31, 1997 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 December 31,
1997, 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 December 31, 1997 and their related consolidated statements of
operations for the fiscal year ended December 31, 1997 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
December 31, 1997, 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 December 31, 1997 and for the period then ended and such
operating statements are complete and correct in all material respects; (k)
since December 31, 1997, 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
<PAGE>
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) none
of the Eligible Properties shall be subject to or encumbered by any mortgage,
deed of trust, security agreement, lien or encumbrance of any kind, except
for Permitted Liens; (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 and has not taken
any action that would prevent it from qualifying as a REIT pursuant to
856-860 of the Code and the related regulations for its tax year ended
December 31, 1997 and all subsequent years during the term of the Revolving
Credit Loans; (r) the Borrower has provided the Agent on behalf of the Banks
with Lease Summaries and information packages regarding each of the Eligible
Properties, and such information packages fairly represent the position of
each of the Eligible Properties on the date hereof or as of the date of
delivery thereof (if applicable); (s) neither the Borrower, the Guarantor or
any of their respective Subsidiaries is an "investment company", or an
"affiliated company" or a "principal underwriter" of an "investment company",
as such terms are defined in the Investment Company Act of 1940; and (t) no
security of the Guarantor traded on a National Securities Exchange has been
suspended from trading or de-listed, except that the securities of the
Guarantor may have been suspended from trading for brief periods of time due
to various public offerings of the securities of the Guarantor.
7. 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
<PAGE>
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-K) 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)
together with the quarterly and annual audited Financials, a
certificate of the Borrower and the Guarantor (in substantially the
form attached to Exhibit E hereto) setting forth computations
demonstrating compliance with the Borrower's and the Guarantor's
financial covenants set forth in 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; (v)
contemporaneously with the filing, mailing or issuances 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 and copies of all press and news releases made by the
Borrower, the Guarantor or any Additional Guarantor; (vi) promptly
after its receipt thereof, annual financial information regarding
commercial tenants in the Eligible Properties as applicable and
available and (vii) if a Default or an Event of Default or a
materially adverse change in any of the Eligible Properties shall have
occurred, Appraisals (or updates thereof if required) of the Eligible
Properties within thirty (30) days after the request of the Agent
therefor; (viii) from time to time, upon request of the Agent or the
Banks, such other financial data and information about the Borrower,
the Guarantors, the Additional Guarantors, their respective
Subsidiaries, the Real Estate Assets and as the Agent may reasonably
request, and which is prepared by such Person in the normal course of
its business or is required for securities and tax law compliance,
including without limitation, pro forma financial statements, complete
rent rolls and summary rent rolls, existing governmental reports,
surveys, title insurance policies and insurance certificates with
respect to the Real Estate Assets.
(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
<PAGE>
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 Eligible 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 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 for the
repair and improvement of presently owned Real Estate Assets and 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 $5,000,000 for general working
capital purposes of the Borrower;
(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;
(g) do or cause to be done all things necessary (i) to preserve
and keep in full force and effect the existence of the Guarantor as
a Maryland real estate investment trust and its
<PAGE>
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, and (ii) to preserve and keep in
full force and effect the listing of the Guarantor on a National
Securities Exchange, (iii) to cause the Guarantor to continue to
operate as a fully-integrated, self-administered and self-managed
REIT, which, together with its Subsidiaries owns and operates an
improved property portfolio comprised primarily of apartment and
retail properties, (iv) to cause the Guarantor not to engage in any
business other than the business of acting as a REIT and serving as
the general partner and limited partner of the Borrower and as a
member, partner or stockholder of other Persons, (v) to cause the
Guarantor to conduct all or substantially all of its business
operations through the Borrower or through subsidiary partnerships or
other entities in which (x) the Borrower or the Guarantor directly or
indirectly owns or controls as least 51% of the voting interests as
well being entitled to at least 51% of the profits and losses
distributions and (y) the Borrower or the Guarantor directly or
indirectly (through wholly-owned Subsidiaries) acts as sole general
partner or managing member.
(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 Eligible 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.
8. 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
<PAGE>
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 Eligible Properties) or the
financing or refinancing of any permitted Indebtedness secured by
liens on such Real Estate Assets; and (vi) Recourse Indebtedness (not
including the Revolving Credit Loans) of the Borrower or the Guarantor
in an aggregate principal amount not in excess of five percent (5%) of
Consolidated Total Adjusted Asset Value at any time;
(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 Eligible
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;
and (viii) liens securing the payment of Indebtedness permitted by
8(a)(vi) hereof that encumber only the Real Estate Asset acquired with
the initial proceeds of such Indebtedness;
<PAGE>
(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) (i)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
<PAGE>
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; and (ii) 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
Eligible 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
Eligible 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.
9. 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 Fair Market
Value of Eligible 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) request in writing to the
Agent to add to the Eligible Properties from additional Real Estate
Assets on which all real estate due diligence requirements referred to
in 2 hereof have been met and subject to the right of the Agents to
approve or disapprove such request in accordance with 5 hereof, in each
case in order to cure the Borrower's failure to comply with this 9(a)
within the time period referred to in 12.1(c) hereof;
<PAGE>
(b) cause or permit the ratio of Adjusted EBITDA calculated solely
with respect to the Eligible Properties to Pro Forma Debt Service
Charges to be less than 1.75 to 1.0 as at the end of any fiscal quarter
of the Guarantor ending on or after March 31, 1998;
(c) cause or permit the ratio of EBITDA to Total Interest Expense
of the Guarantor to be less than 2.0 to 1.0 as at the end of any fiscal
quarter of the Guarantor ending on or after the March 31, 1998.
(d) cause or permit the ratio of Operating Cash Flow to Total Debt
Service for the Guarantor to be less than 1.75 to 1.0 as at the end of
any fiscal quarter of the Guarantor ending on or after the March 31,
1998.
(e) cause or permit Consolidated Total Liabilities to exceed
fifty-five percent (55%) of Consolidated Total Adjusted Asset Value as
at the end of any fiscal quarter of the Guarantor ending on or after
March 31, 1998.
(f) cause or permit Secured Indebtedness to exceed forty percent
(40%) of Consolidated Total Adjusted Asset Value as at the end of any
fiscal quarter of the Guarantor ending on or after March 31, 1998.
(g) cause or permit Tangible Net Worth to be less than the sum of
(a) $90,000,000 plus (b) ninety percent (90%) of the aggregate proceeds
received by the Guarantor (net of fees and expenses customarily incurred
in transactions of such type) in connection with any offering of stock,
stock equivalents, partnership interests, or other, similar investment
interests in the Guarantor as at the end of any fiscal quarter of the
Guarantor ending on or after March 31, 1998.
(h) cause or permit the aggregate Budgeted Renovation Costs of all
Renovations to exceed fifteen percent (15%) of Consolidated Total
Adjusted Asset Value as at the end of any fiscal quarter of the
Guarantor ending on or after March 31, 1998.
(i) cause or permit the value of Unhedged Variable Rate
Indebtedness to exceed thirty percent (30%) of Consolidated Total
Adjusted Asset Value as at the end of any fiscal quarter of the
Guarantor ending on or after March 31, 1998.
<PAGE>
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 April ___, 1998:
10.1. 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.
10.2. 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 declaration of trust 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.
10.3. 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.
10.4. 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
<PAGE>
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.
10.5. Survey and Taxes. The Agent shall have received (a) a
Survey of each of the Initial Eligible 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 Eligible Properties
which are or will become due and payable on or before the Closing Date.
10.6. 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.
10.7. Leases, Service Contracts and Other Documents. The Agent
shall have received from the Borrower Lease Summaries, all material Service
Agreements, and all Partnership Documents.
10.8. Estoppel Agreements. The Agent shall have received
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
Eligible Properties.
10.9. 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 Eligible 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.
<PAGE>
10.10. 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 Eligible 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.
10.11. 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 Cummings & Lockwood (or other
counsel), as counsel to the Borrower, the Guarantor, the Additional
Guarantors and their respective subsidiaries.
10.12. 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 Eligible Properties and connected directly to the Buildings with
all necessary Permits.
10.13. Permit Assurances; Compliance. The Agent shall have
received evidence reasonably satisfactory to the Agent that (i) all
activities being conducted on the Initial Eligible 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 Eligible Properties are in
compliance with all zoning, land use, environmental, architectural access,
historical and building laws.
10.14. 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.
10.15. Financial Analysis of Initial Eligible Properties. Each
of the Banks shall have completed to its satisfaction, a financial analysis
of each Initial Eligible Property, which analysis shall include, without
limitation, a review, with respect to each Initial Eligible 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
<PAGE>
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.
10.16. Inspection of Eligible Properties. The Agent and each
Bank shall have completed to its satisfaction an inspection of
the Initial Eligible Properties at the Borrower's expense.
10.17. 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.
10.18. 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.
10.19. Fees. The Borrower shall have paid to the Agent, for the
accounts of the Banks or for its own account, as applicable, all reasonable
fees and expenses that are due and payable as of the Closing Date in
accordance with this Agreement.
10.20. 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 F.
11. 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:
11.1. Representations True; No Event of Default; Compliance
Certificate. Each of the representations and warranties of the
Borrower, the Guarantor and the Additional Guarantors
<PAGE>
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 2.5(d)(iii).
11.2. 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.
11.3. 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.
12. EVENTS OF DEFAULT; ACCELERATION; ETC.
12.1. 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 8 or 9 (other than the covenant set
forth in 9(a) hereof); (c) the Borrower shall fail to perform the
covenant set forth in 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 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
<PAGE>
but is capable of being corrected within an additional twenty (20)
day 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
<PAGE>
Documents to be, andthey 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 12.1(h) or
12.1(i), all suchamounts 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.
12.2. Termination of Commitments. If any one or more Events of
Default specified in 12.1(h) or 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.
12.3. 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 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.
<PAGE>
12.4. Distribution of 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 Revolving Credit Loans, 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 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 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.
13. SETOFF. 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,
other than those accounts in the possession of First Union National Bank
which relate to any currently existing secured financing between the Borrower
and First Union National 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
<PAGE>
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 or other recourse against the Borrower.
14. ENVIRONMENTAL MATTERS.
14.1.Representations and Warranties. The Borrower, the Guarantor,
and each Additional 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 the Borrower, the
Guarantor and each Additional Guarantor has caused environmental assessments
to be conducted and/or taken other steps to investigate the past and present
environmental condition and usage of the Real Estate Assets and the
operations conducted thereon. Except as disclosed in the environmental
assessments provided to the Agent pursuant to 10.10 and based upon such
assessments and/or investigation, the Borrower, the Guarantor and each
Additional Guarantor represent and warrant, to the best of their knowledge,
that: (a) none of the Borrower, the Guarantor, any Additional Guarantor, any
of their respective Subsidiaries or any operator of the Real Estate or any
portion thereof, or any operations thereon is in violation, or alleged
violation, of any Environmental Law, which violation or alleged violation (in
writing) has, or its remediation would have, by itself or when aggregated
with all such other violations or alleged violations, a Materially
Adverse Effect, (b) none of the Borrower, the Guarantor, the
<PAGE>
Additional Guarantor or any of their respective
Subsidiaries has received notice from any third
party, including, without limitation, any federal, state or local
governmental authority, (i) that it has been identified by the United States
Environmental Protection Agency ("EPA") as a potentially responsible party
under CERCLA with respect to a site listed on the National Priorities List,
40 C.F.R. Part 300 Appendix B (1986), (ii) that any hazardous waste, as
defined by 42 U.S.C. 6903(5), any hazardous substances as defined by 42
U.S.C. 9601(14), any pollutant or contaminant as defined by 42 U.S.C.
9601(33) or any toxic substances, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") which it has generated, transported or disposed of has been
found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that the Borrower, the Guarantor, any
Additional Guarantor or any of their respective Subsidiaries conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law, or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances; which
event described in any such notice would have a Materially Adverse Effect,
(c) (i) no portion of the Real Estate Assets has been used, from the time of
ownership by the Borrower, the Guarantor, or an Additional Guarantor, as the
case may be, for the handling, processing, storage or disposal of Hazardous
Substances except in accordance with applicable Environmental Laws; and no
underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of any Real Estate Asset except in
accordance with applicable Environmental Laws, (ii) in the course of any
activities conducted by the Borrower, the Guarantor, any Additional
Guarantor, their respective Subsidiaries or to the knowledge of the Borrower,
without any independent inquiry other than as set forth in the environmental
assessments, the operators of the Real Estate Assets, or any ground or space
tenants on any Real Estate Asset, no Hazardous Substances have been generated
or are being used on such Real Estate Asset except in accordance with
applicable Environmental Laws, (iii) there has been no present or past
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping (a "Release") or
threatened Release of Hazardous Substances on, upon, into or from the Real
Estate Assets from the time of ownership by the Borrower, the Guarantor or an
Additional Guarantor, as the case may be, (iv) to the knowledge of the
Borrower without any independent inquiry other than as set forth in the
environmental assessments, there have been no Releases on, upon,
from or into any real property in the vicinity of any
<PAGE>
of the Real Estate Assets which, through soil or groundwater
contamination, may have come to be located on such Real Estate
Assets, and (v) any Hazardous Substances that have been generated
by the Borrower, the Guarantor or any Additional Guarantor or any
of their respective Subsidiaries at any of the Real Estate Assets
have been transported off-site only by carriers having an
identification number issued by the EPA, treated or disposed of
only by treatment or disposal facilities maintaining valid
permits as required under applicable Environmental Laws; any of
which events described in clauses (i) through (v) above would
have a Materially Adverse Effect, (d) by virtue of the use of the
Revolving Credit Loans proceeds contemplated hereby, or as a
condition to the effectiveness of any of the Loan Documents, none
of the Borrower, the Guarantor, any Additional Guarantor or any
of the Real Estate is subject to any applicable Environmental Law
requiring the performance of Hazardous Substances site
assessments, or the removal or remediation of Hazardous
Substances, or the giving of notice to any governmental agency or
the recording or delivery to other Persons of an environmental
disclosure document or statement.
14.2.Environmental Indemnity and Covenants.
(a) The Borrower, the Guarantor, and each Additional Guarantor
jointly and severally agree that they will indemnify and hold the Agent
and each Bank, and each of their respective Affiliates, harmless from
and against any and all claims, expense, damage, loss or liability
incurred by the Agent or any Bank (including all reasonable costs of
legal representation incurred by the Agent or any Bank in connection
with any investigative, administrative or judicial proceeding, whether
or not the Agent or any Bank is party thereto, but excluding, as
applicable for the Agent or a Bank, any claim, expense, damage, loss or
liability as a result of: (x) the gross negligence or willful misconduct
of the Agent or such Bank or any of their respective Affiliates, or (y)
any of the below events which first occur following the transfer or sale
of the applicable Real Estate Asset to a party indemnified hereunder or
to a bona fide third party purchaser; and the indemnity set forth herein
shall not apply to any claim or loss arising after the date of purchase
of a Real Estate Asset from the Borrower, the Guarantor, or an
Additional Guarantor (as the case may be) by a subsequent owner who
purchases such Real Estate Asset with the proceeds of loans made by the
Agent or any Bank, unless such claim or loss was directly or indirectly
caused by the Borrower, the Guarantor or the Additional Guarantor)
relating to (a) any Release or threatened Release of Hazardous
Substances on any Real Estate; (b) any
<PAGE>
violation of any Environmental Laws with respect
to conditions at any Real Estate or the operations
conducted thereon; (c) the investigation or remediation of off-site
locations at which the Borrower, the Guarantor, any Additional Guarantor
or any of their respective Subsidiaries or their predecessors are
alleged to have directly or indirectly disposed of Hazardous Substances;
or (d) any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances relating to Real
Estate Assets (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property). In litigation,
or the preparation therefor, the Bank and the Agent shall be entitled to
select their own counsel and participate in the defense and
investigation of such claim, action or proceeding, and the Borrower
shall bear the expense of such separate counsel of the Agent and the
Bank if (i) in the written opinion of counsel to the Agent and the
Banks, use of counsel of the Borrower's choice could reasonably be
expected to give rise to a conflict of interest, (ii) the Borrower shall
not have employed counsel reasonably satisfactory to the Agent and the
Lenders within a reasonable time after notice of the institution of any
such litigation or proceeding, or (iii) the Borrower authorizes the
Agent and the Bank to employ separate counsel at the Borrowers'
expense. It is expressly acknowledged by the Borrower and the Guarantor
that this covenant of indemnification shall survive the payment of the
Loans and shall inure to the benefit of the Agent and the Banks and
their respective Affiliates, their respective successors, and their
respective assigns under the Loan Documents permitted under this
Agreement.
(b) If the Agent has reasonable grounds to believe that a Release
has occurred with respect to any Eligible Property, whether or not a
Default or an Event of Default shall have occurred, the Agent may obtain
(provided the Borrower refuses to so obtain upon request of the Agent
with a qualified consultant or expert approved by the Agent) one or more
environmental assessments or audits of such Eligible Property prepared
by a hydrogeologist, an independent engineer or other qualified
consultant or expert approved by the Agent, which approval will not be
unreasonably withheld, to evaluate or confirm (i) whether any Release of
Hazardous Substances has occurred in the soil or water at such Eligible
Property and (ii) whether the use and operation of such Eligible
Property materially complies with all Environmental Laws. All such
environmental assessments shall be at the sole cost and expense of the
Borrowers, provided, however, such costs and expenses shall be
reasonable in all respects.
<PAGE>
(c) The Borrower, the Guarantor and each Additional Guarantor
covenants and agrees that if any Release or disposal of Hazardous
Substances shall occur or shall have occurred on any Eligible Properties
owned by it or any of its Subsidiaries, such Borrower, Guarantor or
Additional Guarantor will cause the prompt containment and removal of
such Hazardous Substances and remediation of such Eligible Properties as
necessary to comply with all Environmental Laws.
15. THE AGENT.
15.1. 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.
15.2. 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.
15.3. 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
<PAGE>
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.
15.4. 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.
15.5. 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
<PAGE>
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 13 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 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
<PAGE>
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.
15.6. 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.
15.7. 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 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.
15.8. 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.
15.9. 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 15.9 it shall promptly notify the
other Banks of the existence of such default, Default or Event of Default.
15.10. 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
<PAGE>
against expenses and liabilities as the Agent may reasonably request, proceed to
enforce the provisions of this Agreement. 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.
15.11. 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 15 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.
15.12. 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
<PAGE>
receipt of such notice shall be deemed to constitute receipt by the Banks of any
such notice.
16. ASSIGNMENT; PARTICIPATIONS; ETC.
16.1. Conditions to Assignment 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 2.2 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 G 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 16.3, 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.
16.2. 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
<PAGE>
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; (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 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.
16.3 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
<PAGE>
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
16.4. 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.
16.5. Participations. 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) unless a Default or an Event of Default shall have occurred and be
continuing, 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, and (d) 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.
16.6. Pledge by Lender. Notwithstanding any other provision
of this Agreement, any Bank at no cost to the Borrower may at
<PAGE>
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 4 of the Federal Reserve Act,
12 U.S.C. 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.
16.7. 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.
16.8. 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.
17. 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
<PAGE>
(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 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 9 hereof; or
(vii)releases or reduces the liability of the Guarantor
pursuant to the Guaranty; or
(viii)....modifies any provision herein or in any other Loan
Document which by the terms thereof expressly requires Unanimous
Bank Approval; or
(ix) amends any of the provisions governing funding contained
in 2 hereof; or
(x) changes the rights, duties or obligations of the Agent
specified in 15 hereof (provided that no amendment or modification
to such 15 or to the fee payable to the Agent under this Agreement
may be made without the prior written consent of the Agent); or
(xi) 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.
18. 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 th
<PAGE>
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.
<PAGE>
19. WAIVER OF JURY TRIAL. THE BORROWER AND THE GUARANTOR, AS AN
INDUCEMENT TO THE AGENT AND THE BANKS TO ENTER INTO THIS AGREEMENT, HEREBY
WAIVE ALL RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION ARISING IN
CONNECTION WITH ANY LOAN DOCUMENT.
20. PREJUDGMENT 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. 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:
..... Name: Joseph Labrosse
..... Title: Treasurer
..... Address: 598 Asylum Avenue
..... Hartford, Connecticut 06105
..... Telephone: (860) 520-4789
..... Telecopy: (860) 947-6960
..... GROVE PROPERTY TRUST
..... By:
..... 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:
..... Name:
..... Title:
..... By:
..... Name: James F. St. Thomas
..... Title: First Vice President
..... Address: One BankBoston Plaza
..... Providence, RI 02903
..... Telephone: (401) 278-7416
..... Telecopy: (401) 278-8006
..... CITIZENS BANK OF RHODE
..... ISLAND
..... By:
..... Name:
..... Title:
..... Address: One Citizens Plaza
..... Providence, RI 02903
Telecopy: (401) 455-5410
<PAGE>
..... FIRST UNION NATIONAL BANK
..... By:____________________________
..... Name:
..... Title:
..... Address: Real Estate Capital
..... Markets Group
..... One First Union Center
..... 6th Floor
..... Charlotte, NC 28288
..... Telecopy: (704) 383-6205
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
JUNE 30, 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,630
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,876
<PP&E> 187,149
<DEPRECIATION> 6,083
<TOTAL-ASSETS> 187,942
<CURRENT-LIABILITIES> 6,368
<BONDS> 90,807
0
0
<COMMON> 84
<OTHER-SE> 67,082
<TOTAL-LIABILITY-AND-EQUITY> 187,942
<SALES> 0
<TOTAL-REVENUES> 16,240
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,434
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,390
<INCOME-PRETAX> 2,499
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,499
<DISCONTINUED> 0
<EXTRAORDINARY> 838
<CHANGES> 0
<NET-INCOME> 1,661
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
